Bitcoin is getting boring – and why that’s a good thing for Wall Street – DL News

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general motors, Joanna here!

Bitcoin has become boring.

While the cryptocurrency world anxiously awaits the approval of a spot Bitcoin exchange-traded fund, Bloomberg Reports indicate that a Citigroup alumni startup has launched a deposit receipt for Bitcoin.

This may not sound very exciting, but bear with me – it says a lot about where cryptocurrencies are headed in 2024.

In short: TradeFi creep is real, and it’s coming.

Let’s get the technical details out of the way.

Depositary receipts give U.S. investment firms exposure to foreign companies, but in a way that feels safe and familiar.

How do they do it?

• A depository receipt is a bit like stock – it represents ownership in a company – but the company is outside the United States;
• It aims to mitigate the risks associated with investing abroad;
• American Depositary Receipts are denominated in dollars, are traded on stock markets, and are settled through the Depositary Trust Company – the plumbing company for US markets.

What does this have to do with Bitcoin?

The startup, Receipts Depositary Corporation, plans to offer a tool that resembles a deposit receipt but provides direct ownership of bitcoin.

The underlying assets will be protected at licensed custodian bank Anchorage Digital, and will be liquidated through DTC, RDC said.

Depositary receipts do not go through the same SEC approvals process as ETFs do, as they are covered by a regulatory exemption.

However, it is limited to institutional investor clients – this is not a retail product.

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Why is a Bitcoin deposit receipt important?

If all this sounds a bit dry, that’s the point. Institutional investors such as banks and pension funds Likes dry.

Wall Street has spent the last decade talking a big game about innovation, but in reality these companies are too tightly regulated to move quickly into new asset classes.

While hedge funds that trade their own money have a toehold in cryptocurrencies, bitcoin has remained too risky, for example, for pension funds that manage the retirement savings of teachers and firefighters.

Volatility, regulatory uncertainty, cybersecurity concerns, and the lack of a market structure that feels safe and familiar are all deterrents.

But pensions and endowments represent huge potential flows of money — which is one reason there’s so much excitement around the prospect of ETFs.

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Bitcoin Deposit Receipts are an answer to the question: How do you get direct ownership without the hassle of actually taking possession of the asset?

That’s what David Easthope, a senior analyst who heads the market structure and technology team at Greenwich Alliance, told me.

With these receipts, “you don’t have any hassles of counterparty risk or cybersecurity. You don’t control the physical assets. You don’t have to worry about your private key or your wallet (or if you want) participating in staking if you’re offering a product,” Easthub said. For Ethereum”.

He added that companies do not want to face the problem of choosing and including a trustee to protect assets.

“They just want to get 0.5% or 1% of the endowment or whatever to get access to Bitcoin,” but without having to bring in a new technology vendor.

Whether it’s depositary receipts — or spot ETFs, for that matter — it is good Solutions remain to be seen. Investors will vote with their dollars.

But the RDC product is another sign that capital markets firms are clamoring for cryptocurrencies.

message me joanna@dlnews.com Or telegram @joannallama.