A group of former Citigroup executives is set to launch bitcoin-backed securities, known as "BTC DRs," without seeking approval from the U.S. Securities and Exchange Commission (SEC).

Receipts Depositary Corp. (RDC) will issue depositary receipts, similar to American depositary receipts (ADRs), representing foreign stocks on U.S. equity exchanges.

The "BTC DRs" will target institutions and will be cleared through the Depository Trust Company (DTC), as stated in a recent press release.

Exempt from SEC

RDC plans to commence the offering, exempt from registration under the Securities Act of 1933, in the coming weeks, according to the statement.

RDC aims to cater to institutional demand for bitcoin investments, addressing potential gaps left by a spot exchange-traded fund (ETF).

Purportedly, these BTC DRs differ from ETFs as they provide direct ownership of bitcoin, with Anchorage Digital Bank National Association serving as the custodian for the underlying bitcoin.

BTC DRs closely mirror the construction of American Depositary Receipts (ADRs), operating within U.S.-regulated market infrastructure and cleared through The Depository Trust Company (DTC).

They have been assigned a CUSIP number and an ISIN.

Breaking the Mold

The development marks an extension of the established, regulated financial product tradition. ADRs, originating in 1927, are utilized by over 6,500 global financial institutions, totaling over $1 trillion in traditional DR securities.

RDC's BTC DRs aim to provide qualified institutional buyers (QIBs) with secure, regulated access to digital assets.

RDC's model involves Broadridge Corporate Issuer Solutions, LLC serving as the SEC-registered transfer agent and Anchorage Digital Bank National Association providing custody in a bankruptcy remote structure.

All bitcoin represented by BTC DRs will be held at the custodian exclusively for the benefit of BTC DR holders.

RDC ensures that all BTC DRs are 100% backed by bitcoin held in custody, safeguarding against lending, re-hypothecation, or pledging.

BTC DRs enable direct ownership of the underlying asset, are fully fungible, and represent a direct claim on bitcoin held in custody, mitigating counterparty credit risk.

The model leverages existing workflows and utilizes the existing securities ecosystem for robust risk management and asset protection.