Coinbase to Launch On-Chain TradFi Assets Platform Under Abu Dhabi's Oversight

• Coinbase Asset Management Branch Ventures into Digital TradFi Assets
• Unveiling Project Diamond
• Receiving Regulatory Approval
• Increasing Competition in the Crypto Space
• Tokenization of Real-World Assets (RWAs)
• A New Approach to Tokenization
• Closing the Gap in Global Assets

Coinbase Asset Management Branch Ventures into Digital TradFi Assets

Coinbase Asset Management, an offshoot of Coinbase (COIN), is venturing into a new frontier by introducing traditional financial (TradFi) assets to the world of blockchain. The company is launching a unique platform that will enable institutional investors to issue and exchange digital debt instruments via Base, an Ethereum$2,315 -2.42% scaling network of the exchange.

Unveiling Project Diamond

Named Project Diamond$3.95 1.12%, this new initiative by Coinbase Asset Management integrates various technologies and services. This includes Coinbase Prime's custody service, the exchange's Web3 crypto wallet, Circle's USDC stablecoin, and the layer-2 network, Base. The objective is to establish a robust capital marketplace.

Receiving Regulatory Approval

The platform has acquired an in-principle approval from the Financial Services Regulated Activity (FSRA) of Abu Dhabi Global Market (ADGM). The company mentioned it is set to enter the agency's RegLab sandbox. Furthermore, it has already issued and distributed its maiden debt instrument, a short-term discount note denominated in USDC stablecoin, on Base. This was done as a demonstration to regulators in Abu Dhabi. The platform is open to registered institutional players outside the U.S.

Increasing Competition in the Crypto Space

The introduction of Project Diamond by Coinbase comes amidst intense competition from global banks and crypto-native businesses. The goal for all is to increase the influx of traditional financial assets, such as bonds and credit, onto blockchain rails.

Tokenization of Real-World Assets (RWAs)

The process of bringing traditional assets onto the blockchain is often referred to as the tokenization of real-world assets (RWAs). Experts in the field believe this process can result in faster settlements, reduced operating costs, and increased transparency when compared to the traditional financial infrastructure. The prediction by asset management firm 21.co suggests that the market for tokenized RWAs could reach a staggering $10 trillion by the end of this decade.

A New Approach to Tokenization

Project Diamond is taking tokenization a step further by forming digital assets directly on the blockchain. This is a significant departure from the conventional method of creating token versions of existing instruments.

Shaun Martinak, Head of Infrastructure Development at Coinbase Asset Management, shared his perspective via email. He stated, Tokenization is a vital first step, but the natural conclusion is a transition to digitally native assets. Instead of tokenizing off-chain assets, this digitally-native debt instrument was created and matured fully on-chain, with an automated lifecycle that leverages next-generation infrastructure.

Closing the Gap in Global Assets

According to Coinbase, less than 0.25% of total global assets are currently represented on blockchain infrastructure. This discrepancy presents immense potential for efficiency gains. The company's objective is to bridge this gap by fostering institutional use of next-generation financial technology.

Edited by Jonathan Stoker