This group of Citi alumni want to bypass the SEC to launch Bitcoin "securities"?article to understand what BTC depositary receipts are

By Jamie Crawley, Coindesk

Compilation: Jordan, PANews

As speculation about the imminent approval or rejection of SpotBitcoin ETFs heats up, a group of former Citigroup executives are trying to find new ways to give investors more options.

On the evening of January 4, a company called “Receipts Depositary Corporation (RDC)” surfaced, and the company’s three co-founders, Ankit Mehta, Bryant Kim and Ishaan Narain, all worked on the Citi Depositary Receipts team and were very familiar with the financial framework of depositary receipts, which led to the acquisition of Franklin Templeton, BTIG and Broadhaven Ventures and other institutions favor support.

What is an American Depositary Receipt?What is a Bitcoin Depositary Receipt?

According to RDC, the company will offer Bitcoin depositary receipts similar to American Depositary Receipts (ARD) and will not require approval from the SEC.

So the first question is, what is an American Depositary Receipt?

Depositary receipts (DRs) are securities issued by depositaries that represent ownership of the underlying assets and help investors convert, hold, and transfer the underlying asset, such as foreign equity or bonds. According to the relevant securities laws of the United States, a company listed in the United States must be registered in the United States, and an American depositary receipt is a type of negotiable certificate issued by a U.S. commercial bank to facilitate the trading of foreign securities in the United States, usually representing stocks and bonds that are publicly tradable by non-U.S. companies. American Depositary Receipts (ADRs) are traded in the U.S. market under the same trading procedures as ordinary U.S. stocks, are issued by U.S. banks, and each share contains a number of shares held by a foreign custodian of a company from a country other than the United States, and can be freely traded on the U.S. stock exchange market or over-the-counter market, facilitating access to the U.S. securities market for non-U.S. companies.

After understanding the concept of American depositary receipts, let’s take a look at Bitcoin depositary receipts.

Bitcoin Depositary Receipts are essentially a Bitcoin investment vehicle that is fully fungible with the underlying Bitcoin held by a designated custodian, and RDC’s Bitcoin Depositary Receipts represent direct ownership of the underlying Bitcoin, rather than a stake in the fund. To put it simply, Bitcoin Depositary Receipts allow U.S. investors to invest in Bitcoin in the same way that they invest in overseas companies, without conflicting with the Securities Act. **

Bitcoin Depositary Receipts follow the same structure as American Depositary Receipts, which, like American Depositary Receipts, operate within a U.S.Bitcoin-regulated market infrastructure and are liquidated by a Depositary Trust Company (DTC), which currently includes Broadridge Corporate Issuer Solutions and Anchorage Digital Bank National Association, the former will act as a transfer agent, and the latter will be responsible for the underlying Bitcoin custody, and it is reported that RDC’s Bitcoin depositary receipts have obtained a CUSIP number and an International Securities Identification Number (ISIN).

6 questions to learn more about RDC Bitcoin Depositary Receipts

1. Does RDC, which issues Bitcoin depositary receipts, own custodial Bitcoin?

No, as a custodian, RDC does not own the underlying Bitcoin in custody under the terms of the Bitcoin Depositary Receipt Facility, and the escrow Bitcoin is owned by the Bitcoin Depositary Receipt holder.

2. Do Bitcoin Depositary Receipts track asset value?

Bitcoin Depositary Receipts are fully fungible with the underlying Bitcoin and are designed to track the asset value of the underlying Bitcoin.

3. Can I lend BTC under the escrow Bitcoin depositary receipt?

No, escrow Bitcoin cannot be lent out and must be 100% supported for every Bitcoin depositary receipt in circulation.

4. Is the escrow Bitcoin available for creditors to claim?

No, the custody structure of Bitcoin depositary receipts means that the custody of Bitcoin is isolated from the asset itself. The underlying Bitcoin is owned by the Bitcoin Depositary Receipt holder.

5. Who can issue and cancel Bitcoin depositary receipts?

Qualified Institutional Buyers (QIBs) can issue and cancel Bitcoin depositary receipts.

6. What other assets does RDC’s custody platform support?

RDC’s mission is to extend the traditional depositary receipt structure to digital and alternative assets, and while Bitcoin depositary receipts are the only products currently offered, some of the most widely used digital and alternative asset offerings are being actively explored under a comprehensive due diligence process that takes into account the needs of institutional investors, the ability of custodians to support these assets, and the needs of the majority, as well as regulators’ views on the underlying asset, Bitcoin.

Summary: What are the advantages of introducing the concept of “depositary receipts” to Bitcoin?

Depositary receipts can be cleared and settled through depositary trust companies, enabling investors to trade in their traditional clearing systems. Unlike most other access products, depositary receipts provide direct ownership of the underlying assets, and custodians provide high-touch, value-added operational services to depositary receipt holders.

What’s more, this model is exempt from the registration requirements of the US Securities Act, meaning that Bitcoin depositary receipt custodians can “bypass” the US SEC – at least for now. According to RDC, the Bitcoin depositary receipts they launched are positioned as complementary to SpotBitcoin ETFs, and from this perspective, Bitcoin depositary receipts may also be a good option in case SpotBitcoin ETF is not approved.