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Former Citi Execs Launch Bitcoin-Backed Securities Without SEC Approval

2024.01.05

 

Key Takeaways

  • Ex-Citigroup executives plan to launch BTC depositary receipts, providing a unique investment vehicle beyond traditional ETFs.
  • The new offering aims to fulfill institutional demand for bitcoin investments without needing SEC approval.

Innovative Bitcoin Investment Approach

A team of former Citigroup executives is set to revolutionize the bitcoin investment landscape with their novel offering: bitcoin-backed securities known as “BTC depositary receipts” (BTC DRs). This initiative, led by Receipts Depositary Corp. (RDC), is designed to cater to institutional investors, allowing them to directly invest in bitcoin through a structure similar to American depositary receipts (ADRs) used for foreign stocks in U.S. equity exchanges.

Regulatory Strategy and Launch Plan

In a strategic move to circumvent the need for U.S. Securities and Exchange Commission (SEC) approval, RDC’s BTC DRs will be offered under exemptions from registration stipulated in the Securities Act of 1933. The plan is to initiate these offerings within the next few weeks, clearing them through the Depository Trust Company (DTC). This approach aims to exploit a legal pathway for institutional investors to engage in bitcoin investments without the regulatory hurdles often associated with cryptocurrency ventures.

Advantages of BTC Depositary Receipts

Ankit Mehta, co-founder and CEO of RDC, highlighted the multiple benefits of using depositary receipts. He emphasized their proven structure, the direct ownership they offer over the underlying asset, and the ease of inclusion in institutional portfolios. This innovative investment vehicle emerges as a promising alternative to the much-anticipated spot exchange-traded fund (ETF) for bitcoin, which the SEC is expected to approve shortly in the U.S.

Direct Bitcoin Ownership and Custody

Unlike bitcoin ETF shares, which are typically redeemed for cash, BTC DRs promise direct ownership of bitcoin. This feature, as explained by Mehta in discussions with Bloomberg, represents a significant advancement for investors seeking a more direct relationship with their cryptocurrency assets. Anchorage Digital Bank National Association is set to provide custody services for the underlying bitcoin, ensuring secure and reliable management of these assets for investors.

 


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