A recent Bloomberg bitcoin–btc-securities-that-don-t-need-ok-from-us?utm_content=” target=”_blank” rel=”noopener nofollow”>report revealed that a group of former Citigroup executives had introduced an investment offering called bitcoin (btc) depositary receipts (btc DR).
These securities, backed by the largest cryptocurrency on the market, are being positioned as an alternative to spot bitcoin. exchange traded funds (ETFs) that require approval from US regulators.
The startup behind this initiative, Receipts Depositary Corporation (RDC), plans to issue the first bitcoin depositary receipts to qualified global companies. institutional investorsproviding them with a convenient and regulated way to gain exposure to btc.
bitcoin Deposit Receipts vs bitcoin ETFs
bitcoin Depositary Receipts, brought to you by Receipts Depositary Corporation, offer clear differences compared to bitcoin Spot ETFs.
As speculation about the approval or denial of bitcoin ETFs intensifies, RDC's offer aims to “avoid” the need for regulatory approval and provide a different investment opportunity. btc ETFs require approval from regulatory bodies such as the US Securities and Exchange Commission (SEC).
In contrast, btc DR are positioned as securities that do not require regulatory approval. RDC claims that its offering falls within transactions exempt from registration under the Securities Act of 1933.
Another key difference lies in the ownership structure. btc ETFs typically give investors indirect ownership of bitcoin through shares or units of the ETF, which can be redeemed for cash. However, btc DRs offer institutional investors a way to own bitcoin-based securities.
Market infrastructure also distinguishes the two investment options. bitcoin ETFs operate within the established framework of the ETF market infrastructure, involving authorized participants, creation and redemption mechanisms, and listing on regulated exchanges.
On the other hand, btc DRs leverage US-regulated market infrastructure and are cleared through the Depository Trust Co. This familiar market channel provides institutional investors with access to btc securities.
Address institutional concerns
In terms of investment structure, bitcoin ETFs function as funds that invest directly in btc, with the goal of tracking the price of the cryptocurrency and offering investors exposure to its performance.
btc DRs, on the other hand, resemble American Depository Receipts (ADRs) and represent ownership of foreign securities, in this case, btc. This structure allows institutions indirectly hold btc through securities without directly participating in the cryptocurrency market.
Furthermore, bitcoin ETFs have generated significant market anticipation, with expectations of greater liquidity and legitimacy for the cryptocurrency market.
btc DR, as a complementary offering, aims to address institutional concerns about direct holding of btc. The depository receipt structure may appeal to institutions looking for regulated and familiar investment instruments within the digital asset ecosystem.
According to the report, Broadridge Corporate Issuer Solutions will be the transfer agent to ensure a strong and secure offering. At the same time, Anchorage National Digital Bank Association will take care of the custody of the underlying bitcoin.
Will Depository Receipts Drive Institutional Adoption in 2024?
Diogo Mónica, co-founder and president of Anchorage Digital, believes that bringing market standards such as deposit receipts to the digital asset ecosystem will be a significant trend in 2024.
Many traditional institutions want direct exposure to btc but remain on the sidelines due to regulatory uncertainties. bitcoin depositary receipts “fill this gap, giving institutions the best of both worlds,” according to Monica.
By combining traditional financial market standards with the digital asset ecosystem, RDC aims to provide institutional investors with direct exposure to btc, overcoming the challenges associated with crypto market infrastructure and regulatory uncertainties.
As the industry anxiously awaits regulatory decisions on btc ETFs, the emergence of bitcoin depositary receipts offers an intriguing alternative for institutions looking to participate in the growing cryptocurrency market.
Featured image from Shutterstock, chart from TradingView.com
