TL;DR
- Coinbase asset management announces its building Project Diamond—a tokenization solution for native digital assets.
- Project Diamond will allow institutional investors to issue, buy, and sell digitally native debt instruments using Base.
Project Diamond Receives Principle Approval for ADGM RegLab Participation
Coinbase joins the race to bring traditional finance (TradFi) assets to blockchain with Project Diamond.
The new platform will allow institutional investors to create, buy, and sell digitally native debt instruments seamlessly.
Project Diamond is built on Base, Coinbase’s Ethereum scaling network, and calling on investors to partner with them.
It’s issuing the debt instrument on the platform as it prepares to enter the Abu Dhabi Global Market (ADGM) RegLab Sandbox.
Coinbase will comply with Abu Dhabi’s regulations to unlock institutional adoption. The debt instrument is a short-term discount note denominated in the USDC stablecoins.
The platform will use Circle’s USDC stablecoin, the layer-2 Coinbase blockchain Base, the Coinbase Web3 wallet, and the Coinbase Prime custody solution.
Tokenization is an important 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 takes full advantage of next-generation infrastructure.
Shaun Martinak, head of infrastructure development at Coinbase, said.
In addition, its initial use cases will be for registered institutions outside the United States. A move stipulated by Coinbase legal battle with the SEC.
Project Diamond has already received principal approval to participate in the ADGM RegLab.
Is Coinbase Collaborating with TradFi?
Coinbase revelation comes when there’s fierce competition between global banks and crypto-native companies to bring more traditional financial assets on blockchain rails.
The process is often referred to as the tokenization of real-world assets. However, the announcement didn’t mention such a term to emphasize it being natively digital.
And rather not linking it as an off-chain asset. In any case, most digital securities launched by major traditional (TradFi) banks are mostly natively digital.
However, regulations are a big challenge for TradFi. The Basel Committee is launching a consultation to update crypto rules for banks.
It may insist that for tokenized securities to qualify as low-risk, they must be on permissioned blockchains. This can be problematic as asset managers are not subject to these restrictions. Moreover, fund managers are also very keen on public blockchain.
Project Diamond to Upgrade Operational Efficiency in Crypto-Economy
Coinbase move will offer speedier settlements, more transparency, and cheaper operations overall.
It may simplify important financial processes to allow traditional institutions to participate further in the crypto economy.
Crypto investors speculate the move may take tokenization to the next level. It may create digital assets on the blockchain directly rather than crafting token versions of an existing instrument.
Many believe tokenization is the first step to transitioning to digitally native assets.
Meanwhile, BIS is also trying to tap into tokenization by helping create the Unified Ledger. It encompasses tokenized deposits, digital securities, and CBDC. And may not use a permissionless blockchain.
Investors are closely monitoring these two projects as they unravel.
Do you think Coinbase’s new platform will successfully bring TradFi on-chain?
Sam Farao
Sam is our pioneering figure in affiliate marketing and the blockchain space (prior to co-founding Coinweb.com). His ventures, including Netpixel Media and Captana, have set new benchmarks in the affiliate marketing industry, leading to a notable acquisition by Speqta AB for 31.5 million Norwegian kroner ($3.8 million USD). Farao's foray into blockchain technology is marked by the Lightbulb Man project, a blockchain-based art collection featuring NFTs, which sold out in one day! This highlights his role in merging the worlds...
