Amid the ongoing interest in the potential approval or denial of the spot-Bitcoin exchange-traded fund (ETF) by the Security and Exchanges Commission (SEC), the former executives of Citigroup (NYSE: C) have come up with a creative solution.
The startup, Receipts Depositary Corporation (RDC), intends to issue the initial Bitcoin depositary receipts to eligible global institutional investors. These transactions will be conducted in a manner exempt from registration under the Securities Act of 1933, as reported by Bloomberg on January 4.
Referred to as BTC DRs, this offering will provide institutional access to Bitcoin securities via US-regulated market infrastructure.
The difference between BTC DRs and BTC ETFs
In contrast to Bitcoin ETFs redeemed for cash, depositary receipts provide eligible institutions with direct ownership of this crypto. The direct purchase of Bitcoin is not preferred for certain regulated institutions due to challenges within crypto markets, such as security risks and regulatory uncertainties.
Some of these challenges resemble those encountered by Americans investing in foreign companies, which were addressed by introducing American depositary receipts.
The fundamental premise of the flagship crypto is to eliminate the necessity for a centralized clearinghouse by utilizing a decentralized blockchain or public ledger. This technology automatically verifies, records, and settles transactions among users.
Bitcoin holders also have the option to store the coins independently, bypassing the reliance on an external custodian. Nevertheless, the co-founders of RDC believe that BTC depositary receipts will offer institutions a level of comfort they may find more appealing.
Whether BTC DRs will prove a better solution than ETFs remains to be seen, but it seems probable that they will offer more privacy and faster transactions that some institutional subjects may prefer more.