- BTC depositary receipts are exempt from registration under the Securities Act
- They provide direct ownership of Bitcoin unlike shares in Bitcoin ETFs
Receipts Depositary Corp. (RDC), a legal entity comprised of former Citigroup executives, announced plans to introduce Bitcoin-backed securities that do not require the US Securities and Exchange Commission’s (SEC) approval, Bloomberg reported, cited by CoinDesk.
RDC will offer BTC depositary receipts to customers in transactions that are exempt from a registration requirement as per the Securities Act of 1933.
What are Bitcoin depositary receipts?
The depositary receipts to be offered are not unlike the American depositary receipts (ADRs) that represent foreign stocks on US equity exchanges. An ADR is a negotiable certificate that a US bank issues, which represents a certain number of shares in a foreign company, typically one. It trades on US stock markets like any US company’s shares.
Like buying shares in overseas companies
ADRs give US investors an opportunity to buy shares in foreign entities that they otherwise couldn’t. Foreign companies also benefit, as ADRs make it possible for them to attract US capital and investors without the costs and challenges of undergoing a listing on US exchanges.
The Bitcoin depository receipts will be available to institutions according to RDC’s press release, cited by Bloomberg. The Depository Trust Company (DTC) will clear them.
A conversion tool for asset holders
CEO and cofounder of RDC Ankit Mehta described the venture as a conversion tool for asset holders who want to convert Bitcoin into a DTC-eligible security. It will give asset holders direct ownership of the securities.
Depository receipts provide direct ownership of the flagship crypto unlike shares in Bitcoin ETFs, which will be redeemable for cash, Mehta added.
Addressing an unmet need
According to RDC, their product will meet an institutional need to invest in Bitcoin, which a spot exchange-traded fund (ETF) cannot satisfy. What’s more, the SEC has yet to approve the launch of a spot Bitcoin ETF in the US.
