Eric Peters, chief executive and chief investment officer of Coinbase Asset Management, said all assets will eventually be tokenized as the listed crypto firm’s Project Diamond platform for issuing digitally native securities was just approved in Abu Dhabi.

Peters spoke at the Tradetech DigiAssets conference in London on 14 May.

“All assets will become tokenized as there is a trend toward greater efficiencies to make financial services faster and cheaper,” he said.

He continued that Coinbase Asset Management built Project Diamond, a platform to create, buy, and sell digitally native assets using the Coinbase technology stack and Base, an ethereum layer-2 blockchain.

“It is a platform for issuing securities in a digitally native form as opposed to taking a bond or a fund and then adding a new tokenization layer,” explained Peters.

In November last year the first digital debt instrument was issued, distributed and matured on Project Diamond as a technical demonstration of its feasibility to the Financial Services Regulatory Authority in Abu Dhabi as the platform then prepared to join the Abu Dhabi Global Market, or AGDM’s, sandbox.

Peters said that Coinbase recognised that new infrastructure was needed for real world assets to come into blockchain technology. In particular, a large supply of digital assets will need a more efficient delivery mechanism than the existing methods.

“We started building a separately managed account structure to allow both large and small investors to have control over their assets, as opposed to owning a share in some type of fund or ETF where someone else controls their assets,” he added.

Peters predicted that over the next couple of years, strong financial use cases will be developed for blockchain technologies, especially as the technology improves.

“In five years time, it will be remarkable how much traditional finance and crypto has converged, and all sorts of wonderful new businesses will have bubbled up in this space,” he said. “The transition to digital or blockchain infrastructure for financial services is now very clearly underway.”

US regulation

Coinbase has opened a derivatives exchange in Bermuda, has a small offshore presence in the Cayman Islands and in Abu Dhabi as an asset management, where regulators are more open to innovation in digital assets.

In the US, the Securities and Exchange Commission has approved spot bitcoin ETFs, so traditional finance firms will want to fully engage in this space. “The end game is inevitable,” said Peters.

He continued that Blackrock chose Coinbase to provide infrastructure for asset manager’s firm’s spot bitcoin ETF, which sent a signal to institutional investors and banks that the asset class is here to stay.

“We are starting to see signs of large pension funds, endowments and sovereign wealth funds warming to that idea,” he added.

The 9th largest state pension fund in the USA just bought #Bitcoin.

The states will lead. 🚀 pic.twitter.com/On9VCkzPT3

— Dennis Porter (@Dennis_Porter_) May 14, 2024