Receipts Depositary Corporation (RDC) recently announced the groundbreaking launch of the first-ever Bitcoin depositary receipt (BTC DR). RDC anticipates issuing the inaugural BTC DRs in transactions exempt from registration under the Securities Act of 1933, specifically targeting Qualified Institutional Buyers (QIBs) in the coming weeks. The ongoing availability of BTC DRs for issuance to QIBs marks a significant milestone in the integration of digital assets into the traditional financial market.
DTC-Eligible Bitcoin Security
BTC DRs mirror the construction of American Depositary Receipts (ADRs) and, akin to ADRs, operate within the US-regulated market infrastructure, cleared through The Depository Trust Company (DTC). The issuance of BTC DRs includes the assignment of a CUSIP number and an ISIN, emphasizing their adherence to established regulatory frameworks and financial product standards.
An Established, Regulated Financial Product
With roots dating back to the creation of the first ADR in 1927, depositary receipts have become a staple for over 6,500 global financial institutions, including multinational banks, brokers, and hedge funds. Institutional investors collectively hold over $1 trillion in traditional DR securities, using them seamlessly for investing in, transacting, clearing, and settling foreign assets in the United States. BTC DRs extend the benefits of depositary receipts to digital assets, allowing QIBs to own Bitcoin using familiar technology, workflows, and counterparty relationships employed for traditional securities.
Ankit Mehta, Co-Founder and CEO of RDC, expressed enthusiasm about providing qualified institutional buyers with secure and regulated access to digital assets through BTC DRs. He emphasized the benefits of using depositary receipts, such as their proven structure, facilitating direct ownership of the underlying asset and easy inclusion in institutional products. BTC DRs offer universal fungibility, allowing QIBs to convert their Bitcoin holdings into DRs and vice versa.
Matthew Taback, Senior Market Maker at GTS, stated, “Depositary receipts are a simple solution to complex access problems for institutional investors.”
Direct Ownership of Bitcoin Through Regulatory Compliance
RDC has strategically partnered with Broadridge Corporate Issuer Solutions, LLC, serving as its SEC-registered transfer agent, and Anchorage Digital Bank National Association, the first OCC-regulated and federally chartered digital asset bank, providing custody in a bankruptcy remote structure. This innovative model ensures that all BTC DRs are 100% backed by Bitcoin held in custody, with stringent restrictions preventing lending, re-hypothecation, or pledging of the underlying assets. BTC DRs offer direct ownership of Bitcoin, full fungibility, and represent a direct claim on Bitcoin held in custody, while mitigating counterparty credit risk.
DRs for Digital and Non-Digital Assets
While BTC DRs mark RDC’s initial offering, the company is poised to create clearinghouse-eligible securities for other alternative assets. The RDC team, with founders Ankit Mehta, Bryant Kim, and Ishaan Narain, each bringing nearly a decade of experience in the DR business, is well-positioned to navigate the technical intricacies of depositary receipts and evolve market structures.
Diogo Mónica, President, and Co-Founder of Anchorage Digital, commended the RDC team’s vision and ability to bring a well-established financial product to digital assets. With the underlying BTC securely stored via institutional-grade custody at Anchorage Digital Bank, BTC DRs are set to contribute to the integration of Bitcoin into the securities ecosystem.
This launch represents a pivotal moment in the convergence of traditional finance and digital assets, opening new avenues for institutional investors to seamlessly engage with Bitcoin within existing regulatory frameworks. The collaboration between RDC and its partners establishes a blueprint for the secure integration of digital assets into the established financial infrastructure.