Bitcoin Depository Receipts (BTC DRs): A Game-Changer for Institutional Investors in 2024

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  • Bitcoin Depository Receipts are DTC-eligible Bitcoin securities aligning with the US-regulated market.
  • BTC DRs contain similar principles and allow Qualified Institutional Buyers to own Bitcoin using similar mechanisms, workflows, and counterparty relationships for traditional securities.
  • RDC has also clarified that the Bitcoin held in custody will fully back the BTC DRs and hence cannot be lent, re-hypothecated, or pledged.

The crypto market 2024 brings plenty of promise to anticipating traders, investors, and regulatory bodies. Initially, the primary concept of Bitcoin forgoes the standard regulatory measures. Satoshi Nakamoto designed the first cryptocurrency to exist for the sole purpose of empowering the user directly. 

However, we soon learned that to achieve the global adoption of web3, we had to create a bridge between both worlds. Since this realization, developers, crypto-based organizations, and regulatory bodies have each chipped in to create this anticipated bridge. From the dynamic working of Bitcoin, developers created stablecoins, CBDC, and Flatcoins to create digital assets that could function on regulatory grounds similar to traditional currency.

 This positive move soon inspired other organizations to seek to broaden the usability of digital currency. For instance, the concept of Bitcoin Spot EFTs is a marvellous organization to participate in the crypto sphere directly. 

In recent developments, Receipts Depositary Corporation has unveiled the first Bitcoin depository Receipt (BTC DR), kickstarting a significant leap with the potential to overhaul Bitcoin’s adoption rate.

Receipts Depositary Corporation unveils shocking news to the industry.

For years, organizations and multi-million investors have been deterred from interacting with the crypto ecosystem. This spurred developers and organizations to create means through which such entities could participate in the market, eventually increasing their valuations. 

For the past few months, Receipts Depositary Corporation has expressed its interest in paving the way for a new path, allowing investors and organizations to interact with the crypto industry. Thus, they unveiled the first BTC DRs, a marvel of ingenuity. According to the Securities Act of 1933 to Qualified Institutional Buyers (QIBs), these new depositary receipts will experience the same benefits and function under the same structures as American depository receipts.

Also, Read Matrixport Predicts US SEC’s Rejection of Bitcoin Spot ETF Proposals.

According to RDC, BTC DRs are DTC-eligible Bitcoin securities aligning with the US-regulated market and will undergo clearance through the Depository Trust Company. Each Bitcoin securities will have a unique CUSIP number and an ISIN. By acquiring this criterion, BTC DRs will officially cement their position within an established financial framework.

A bit of Background for clarity

To truly appreciate this recent marvel, we must first give context to its inspiration, the American Depository Receipts (ADRs). In 1927, the first ADR was established during the golden age of traditional banking. Today, over 6,500 global financial institutions use ADRs. 

This includes multinational banks, brokers, and hedge funds; collectively, this investor owns over $1 trillion in traditional DR securities and utilizes them in investments, transactions, and clearing and settling foreign assets in the US. They experience similar benefits as domestic securities, thus broadening their applications.

Qualified-Institutional-Buyers
A simple definition of Qualified Institutional Buyers.[Photo/AwesomeFintech]
BTC DRs contain similar principles and allow Qualified Institutional Buyers to own Bitcoin using similar mechanisms, workflows, and counterparty relationships for traditional securities. This will be possible by leveraging the standard transaction, customer, and settlement operations. In a nutshell, the Bitcoin Depository Receipts may be the first iteration of Bitcoin Securities, the first genuine merger between traditional and decentralized finance.

Ankit Mehta, Co-Founder and CEO of RDC, said, “We are excited to provide qualified institutional buyers with the secure, regulated access to digital assets they have been waiting for via BTC DRs. There are many benefits to using depositary receipts, such as their tried and true structure, providing direct ownership of the underlying asset and easy inclusion in institutional products. BTC DRs are universally fungible as QIBs can convert their Bitcoin holdings into DRs and vice versa.”

Typically, DRs often solve the complex access problems for most institutional investors. With this new version of Bitcoin securities, investors can fully explore the Crypto market in 2024 without much hindrance.

The secret resides in an SEC-regulated transfer agent and OCC-regulated Custodian.

According to RDC, Broadridge Corporate Issuer Solutions, LLC  and  Anchorage Digital Bank National Association will act as their SEC-registered transfer agent and custodian in a bankruptcy remote structure. By utilizing their capabilities, all Bitcoin represented by BTC DRs will be held at the custodian for the exclusive benefit of the holder. 

Receipts Depositary Corporation has also clarified that the Bitcoin held in custody will fully back the BTC DRs and hence cannot be lent, re-hypothecated, or pledged. Through these measures, the BTC DRs will enable direct ownership of the underlying assets in addition to being fully fungible, representing a direct claim on the Bitcoin held.

Also, Read HTX Exchange Gradually Restores Services, Bitcoin Transactions Now Operational.

This mitigates a counterparty credit risk from the issuing depository. In addition, since Bitcoin securities utilize an existing framework, they will leverage existing workflows and also partake in the benefit of existing securities ecosystems, providing robust risk management and asset protection.

A New Era Emerges

RDC has officially paved the way for institutional investors to seamlessly incorporate Bitcoin into their portfolios. This milestone will kickstart a new wave of prosperity for the crypto ecosystems. Its dedicated teams worked entirely to ensure the Bitciin Depository Receipts were released promptly to take advantage of the crypto market in 2024.

 Diogo Mónica, president and co-founder of Anchorage Digital, commented, “The RDC team has some of the strongest talent available in the highly technical world of depositary receipts. They know the market extremely well and have the vision and ability to bring a well-established financial product to digital assets. And, with the underlying BTC safely stored via institutional-grade custody at Anchorage Digital Bank, we’re excited to help bring BTC to the securities ecosystem.”

With the first iteration of Bitcoin securities a success, RDC has managed to usher in a new era of regulated access to digital access within the traditional financial frameworks.

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Ken Mutuku
Ken Mutuku
I am an enthusiastic writer who believes that facts, knowledge and opinions can be expressed vividly with just a few words. I think that all forms of writing achieve this; hence I have a wide area of expertise and interest, such as cryptocurrency, psychology and the human mind.