President of Coinbase Asset Management on CUSHY, Tokenized Credit, and Onchain Yield

Anthony, what's up? Good to see you. What's up? What's up, guys? Great to see you both. Thanks for joining. We already were kind of Oh, you what I'm saying? Our last guest. Just we didn't intro us ourselves last last time, and we we were told that we need to do that more. So, Anthony, it's great to see you, man.

You too, Drew. It's always a pleasure. And I love I love what you guys are doing. Congrats on all the the growth and success you've had. This is a great show.

Thank you. We're learning a lot. We've already with our last guest, have you have you ever come across tx.org? Did you have a chance to you ever come across them before in the world of tokenized markets with what you do? No. Mm-mm. I haven't. Just learning about them today. But, anyway so, Anthony, I know we've been trying to get you on the show for for a while. I'm I'm happy that we finally finally made it work.

There's so much to cover with CBAM and your role there, and this is definitely falling into the bucket of, like, the people that I just wanna catch up with and hear what what's top of mind in building. It's fun that we get to host the show and do this at the same time.

Get for those who are just meeting you and getting to know CBAM, especially the context in which it came to be and now sits within Coinbase, would love to start there, and then we can we can unpack more of where you're seeing the tokenization space going, credit, packaging some of this up, and then some of the specific products that you guys are bringing to market. We just had some friends from Super State on the show too recently who were giving us some insights into this too.

Yeah. I'll be jumping in. Am I coming through okay? Could be a little bit of static on my side. You guys good? Yep. Cool. Okay. Cool. Well well, just just in terms of background, so I'm I've been with Coinbase now for a little more than four years, and, I just celebrated my one year anniversary yesterday, in leading the Coinbase asset management business. So, before I joined the asset manager, I was running our asset allocators business at Coinbase Institutional, and and I also spun up a tokenization effort.

And so, you know, Brian has this this this thing inside Coinbase, which is, like, 10% bets where you can spend 10% of your time on on a venture bet effectively. And when I went from BlackRock to Coinbase, you know, part of the thesis I had was institutional allocators are gonna come in. They're gonna buy Bitcoin. They're gonna get wallets. But then eventually, this is broadly gonna be a tokenization and market structure conversation.

So that was really early in my in my my view was the kind of focus for this market structure. And so I started out building out, you know, the tokenization strategy and efforts inside coin based institutional, engaging with all the different wonderful companies today that have found a lot of success on bringing tokenized products to market. And a year ago, I I moved out of the institutional business to run the asset manager, Coinbase Asset Management.

So Coinbase Asset Management is a wholly owned subsidiary of Coinbase Global. Today, we have about 825,000,000 in assets under management. The vast majority of our strategies are focused on Bitcoin, Bitcoin yields, and now stablecoin credit strategies. And so we we we manage a lot of money for clients inside of Coinbase. We help them with tax harvesting. We help them with yield generation, volatility management, overlays, all those things.

And we're packaging a lot of those best practices into our funds, our fund strategies today. So it's a team of 13. I've got wonderful partners, the chief investment officer of Credit, Doug Wilson, chief investment officer of, our systematic and AI driven strategies now, Sarah Schroeder, and the rest of the team who help bring the whole thing together.

Zach, I'll let you take the first, the first one because I'm I'm biased and wanna go where I wanna go. I don't have audio for you, Zach. Let me check that one more time. Anthony, I will, then I guess I guess I get the floor then. How do you differentiate these two kinda different focuses between what the company is doing with Bitcoin versus these stablecoin focused credit products?

Like, how do you what what are some of those similarities that those two things share from a structuring standpoint versus the maybe unique unique advantages of of each of those? Those those, I'm sure sure share some things that are similar but have differences, of course.

Well, they're they're very much aligned when you start to talk about Bitcoin yield. That actually was kinda how we started to develop the thesis around stablecoin credit and what is our new credit fund, which is when you have we have a lot of clients. The crypto ecosystem is full of Bitcoin. There's tremendous amount of supply. You have investors who have amassed the vast majority of the net worth is now sitting in Bitcoin.

Those types of investors, whether they're high high net worth investors, family offices, or corporate treasuries, or even protocols, you know, they're looking for ways to make that asset productive to generate yields. And we know Bitcoin doesn't inherently generate yield itself, so you have to go and access new markets for that. Historically, funding rate arbitrage, you know, which, you know, you're selling a a perpetual or future against spot to capture the spread was was a really good robust way to capture yield.

That particular trade has become more challenging and saturated as leverage has left the system. In a bear market. The and so we've shifted to to options overlays where you can build systematic strategies to sell covered calls and sell puts against Bitcoin to generate yields. You're harvesting the premia from volatility for options over Bitcoin. And then the the third strategy that we deploy is for is cash and carry.

And so what that means is you take a customer's Bitcoin, you post it as collateral with an institutional finance desk like Coinbase Credit, You borrow dollars, and you could redeploy that into a higher net interest margin credit instrument. So that that's what we were doing for the last few years, for customers. And so then it kind of evolved, we said, okay. Can we can we package the credit component of where we're getting that net interest margin on top of Bitcoin into its own product? Right?

Can we bring that into a fund wrapper? We bring that into and then can we bring that on chain as a tokenized product? And so so now, you know, that's where the evolution has come, which is to bring the best ideas around around yield generation using higher yielding credit and then package that into a fund structure, put it on chain. And now we're really focused on kind of commercializing that standalone product by itself as a as a dollar based dollar based credit instrument for the crypto markets to capture yield.

When you when when you think about commercial commercializing that specifically, what does that look like? Who are you trying to bring that specifically to maybe in the early days as you bring that to market?

Yeah. Well, yeah, the reality is is that, the first buyers, the people who are really yield harp hungry is everyone. So tradition traditional institutional allocators are yield hungry, and so are the crypto natives, you know, the the folks that are on chain. You know, I think the folks on chain in the crypto ecosystem are a lot more yield hungry today because there's just a lot less options inside directly available to on chain products.

And so for for the on chain investor, they're the first ones who are looking at this type of exposure, very interested in how do I get access to what is historically a a TradFi instrument. Right? And so now that being said, the way we've designed the strategy is that we it's a hybrid approach. It's traditional credit, and it's on chain credit. And the vision for this is to build a diversified portfolio of traditional and on chain credit.

And importantly, it it delivers an excess return component that comes from the tokenized credit. So we're looking for traditional credit instruments that have been tokenized or will be tokenized over the next six to twelve months, and then we wanna be able to play the differentials between that product in a traditional portfolio or on chain.

And and so this strategy comes together, as something that for a traditional credit investor actually is very interesting because they don't really have a way to play the market structure growth of tokenization or the market structure growth of of stablecoins. Right? And the thesis is really that credit credits coming on chain. Traditional securities are coming on chain. They're being reformatted and brought into this this new market structure. Within the new market structure, there are arbitrage opportunities.

And that in and of itself makes it an interesting, diversifier for maybe a traditional allocator who's like, I need to diversify away from my legacy SaaS companies who maybe have some impairment due to AI and wanna get into credit that's newly issued, newly originated, has a little bit of more of a growth trajectory with companies that are made blockchain related.

So can you guys hear me okay now? Am I back? Yep. All good. So where does Kushy start to fit into this, and what what role does it play with within CBAM?

Yeah. So this is the the Coinbase USD stablecoin yield fund. And and so this is a it's a managed product issued by Coinbase Asset Management as a regulated fiduciary investment manager in The United States and out of the Cayman Islands. So we have so the first thing you have to go is go, who who's bringing the product to market? Do they have the experience and the the right regulatory structure to build the bring that fiduciary oversight and the investment experience around to this product?

So that's that's what we do. So so that's a private market institutional product for institutional investors only. And with and so what we've done we've done is we partnered with Superstate on this. We've tokenized it on base, Solana, and Ethereum. And and so the product itself is a is a high yield credit instrument. K?

And so the digitally native crypto investors or traditional investors who want to get access to high yield exposure, then they're able to access this particular product and hold it, and then they could do things inside of the crypto ecosystem with that. And and so so that that's that's generally what it is.

Now we're we're we're stoked to partner with so partner with Superstate on this because they've built so either US licensed transfer agents, and so the the licensing and market structure that they've already connected to within DeFi allows us to very quickly scale into multiple different protocols and multiple networks right away. So so we're we're building on the back of giants here, which is which is really great to see.

We we have Northern Trust as a fund administrator, you know, one of the largest and oldest banks that operates globally and handles fund administration. We've, as an asset manager, been working with Northern Trust for a number of years for different products and strategies that we've had across the business. And and so we're excited to work with them as well.

How did you like, you said you came into BlackRock you came into Coinbase from BlackRock with this vision of tokenization is coming. We wanna come in and prepare the firm for this reality. How has the moment that we're in been different than what you expected? Or what what are some of these things that you knew were gonna happen versus maybe the rise of the influence of stablecoins? I think when you joined the company, like, if I'm remembering correctly, stablecoins were still kind of emerging.

I'm wondering, like, what has been new or unforeseen versus the things that you knew were

there that were coming that I You believed to be true. Yeah. And then they just came to fruition.

You know, the old adage is, you know, you expect something to happen within within five years and it takes ten. Yeah. You you overestimate the short term and you underestimate the long term. So I I certainly overestimated the short term. But but, like, with a little bit of realism around it, is, you know, I was and still am very focused on this as a market structure conversation, and you have to adapt to where the market structure is.

A part of that is regulatory, part of that is the readiness of the investor community, part of that is the readiness of the products themselves. And I'll give you an example. So, when I was at BlackRock, they acquired the Barclays iShares business back in 2009 post GFC, for a fire sale. Right? And, kudos to to Larry Fink who said and his team who said, you know what? This is new financial technology. It's probably gonna be pretty important. Maybe we should own it because this could be a really unique thing.

ETFs took the traditional SMA or mutual fund world from trading something simple like S and P 500 once a day to trading intraday, nine to five, with secondary market liquidity. Right? And so there was a step function change in the way that people access something simple like an index. Right? That's evolved into a multi trillion dollar complex around ETFs today. I was very early in in, launching a lot of the fixed income ETFs. One of the things you didn't see is you didn't see ETFs wrapping mutual funds.

You didn't see a new better version of financial technology wrapping an inferior older version of financial technology. And I believe the same thing is true with tokenization. One of the things that we're trying to do or a lot of players in the space are trying to do is take tokenization and wrap traditional legacy fund structures. Right? And then move those on chain and let the token move in in through protocols. I don't necessarily think that's the right way for the market to develop to develop.

What actually happens, for example, in a fixed in a fixed income ETF, if you take that to Barclays Ag Barclays Aggregate Index, which is, you know, 3,000 plus names, and you wanna do an income create with a AP, you don't give them 3,000 bonds. You give them, like, 100 bonds. So you actually reduce the entire portfolio at the security level down to a handful of bonds that generally match the weighted average duration and credit profile of that index. You give that to the AP. They're they're hedged on risk.

They go create the shares. Now the investor has a full share. Right? So that in concrete, you know, process with with ETFs requires you to change the underlying shape of the instruments before they quit. Right? And you can't really do that when you take a legacy wrapper and you put it in a in a tokenized wrapper. And and so we're taking that thesis to the next level with tokenization in our fund where we're going.

Instead of trying to access, traditional fund products that are that operate in the traditional brokerage and securities world, we're actually launching our own separate accounts with credit originators and asset managers. And so we're not saying we're gonna go out a secondary thing off the shelf. We're gonna actually build our own customized strategy in a separate account that lives inside of the the fund, the tokenized fund that we have.

And that way we have a lot of flexibility to be able to manage the weighted average duration, the liquidity profile, what goes in, what doesn't go in. And we're not subject to the constraints of of really what are the legacy kind of legal structures around fund products. Right? I think it's really important. And as we think about, you know, the future of tokenization, I don't know exactly what it's gonna be. It's still being formed today. The market structure is shaping around it.

And the market structure is complex and that it the you have protocols who are smart contract driven and need to have some level of look through and need to have a lot of automation and can't have, you know, certain things like a NAV that gets repriced, you know, a month or two months later because that impacts how you treated the investors who operated from a protocol perspective. Right? But that's very normal in chat pie. Right? So so you have to think about, like, what is the market structure today?

The market structure is smart contract driven. It's on chain. It's it wants to be instant liquidity, which will I I don't think it's right, but we'll talk about that. And then you wanna reduce the layers of fees as much as you can, reduce the layers of complexity that are underlying that tokenization as well so that those on chain investors can feel more comfortable about what is actually there and how many how many things can impact, you know, the the actual outcome of your total return.

I wanna ask a little bit, and it's funny. I was actually just having this conversation with a with a friend yesterday. Just kinda like you mentioned you joined CBAM. Bitcoin was the focus, custodying Bitcoin, Bitcoin yield strategies. What how much mindshare does Bitcoin still take up in your your current focus today? Is it just kinda like the baseline right now, or maybe how is your outlook on Bitcoin evolved as stablecoins and tokenization and and on chain credit has become more of the focus?

And getting off zero, we've we've always appreciated your approach with that and wondering if it's, like, still in that place in your mind.

So, yeah, we wrote that off zero. I need to, we're gonna update it here now that we're actually at a really low price because we I think we we released that paper when Bitcoin was at, like, a 110.

Nice. You know? Sounds good right now.

The the reality is is and you you would talk to investors all the time. It's like, it's hard to market time, you know, any investment, you know, Bitcoin included because, you know, you get into a bear market like we are today, and you have Bitcoin, you know, touching 58, you know, the as it did this morning, where the sentiment is very bearish. And and, you know, the market continues every cycle to kind of question the long term thesis and trajectory of Bitcoin. The new investors do. Right?

The the staunch investors who are here are buying. Right? The smart money is buying Bitcoin. Right. Right? And we see we see that in the data. On top of that, you see every most major institutional banks, private banks, and brokerages now offering their own ETFs and unlocking access for their investors to to buy Bitcoin. I think Schwab finally released theirs yesterday or day before that. Right?

So the the entire market of US investors, right, are now finally able to participate in in this idea of decentralized money that can't be controlled by a single government or entity. Now and so the the timing around that matters, there's a lot of conversation with Bitcoin, where investors are interested. They wanna continue to allocate.

They're typically not gonna come to us first as an asset manager because we we take an active approach around Bitcoin, which typically means that you've got Bitcoin already, and and you wanna generate yield a bit, make it productive.

So let's say the large cohort of our Bitcoin conversations are with a very experienced Bitcoin investors who are hyper focused on capital preservation, hyper focused on understanding how the yield is generated, and then and at the end of the day, they want to be able to compound and accrue more Bitcoin over time. A lot of conversations with corporate treasuries in that regard as now that they're publicly traded companies, they have shareholders to respond to.

The shareholders are expecting them to be able to generate yield or generate income or have, you know, a strategy around around that. So so Bitcoin side is it feels it feels like a quite mature conversation for the most part. And the the new investors go on the exchange and they they acquire Spot Bitcoin, and we generally don't see those. The Stablecoin credit side is is one that most people understand. I should say credit, most people understand.

Now what they don't understand is, okay, what is the why is the yield on DeFi today two to 5% when, you know, when when traditional rates like, how can the yield of DeFi be lower than treasury rates? Right? The broad market doesn't doesn't understand that. They don't understand that there's two parallel economies being formed within this new market structure versus the legacy structure. And but when you reveal that to them, you say, okay.

On top of that, you now have, you know, you have traditionally crypto native collateral assets that you can utilize for efficiency and arbitrage purposes, and now you have traditional credit and securities instruments that you can use on those new rails and capture the spread differential between those assets.

And so that's where the conversation really gets interesting, and especially for sophisticated investors, institutional investors who are are used to engaging with managers who kinda know how to navigate new infrastructure or new market structure and a lot of this changing innovations happening. They understand there's a lot of opportunity in that space. That's where we focus today with our with our clients. What

is, like, that first thing when you're talking to somebody like that that they're diving into that just really starts to maybe break down the paradigm of how they're thinking through finance and and kinda like to set those two parallel worlds. What is something that just shocks them and that they that and that really just starts to shatter their worldview of what they thought to be Common moments with Yeah. The folks you're talking to.

Yeah. Well well, the the moment typically comes in when you talk about just the sheer velocity and size of Stablecoin volumes for a lot of folks. Like, they don't they don't see it. It doesn't move through their traditional systems, and so they don't they don't see the the tens of trillions of dollars of volume that gets turned over, within the stablecoin ecosystem. Folks don't really see that there are, Hi. How are you doing? I'm Zach. Sorry. We we got a new joiner.

Sorry. Really quick. Other Zach is preparing the the other the the last get the next guest. Sorry to interrupt you, Anthony.

Okay. I I think, I think most investors are they're out they're surprised to hear how far along the the ecosystem is and the infrastructure is. And I think what they're looking for today is is stability of returns, consistency of returns, well thought out strategies offered in institutional wrappers. I think most traditional investors, so they still aren't really able to access the on chain markets in a really clear, concise way. Now the wallet infrastructures around the world are moving rapid at a rapid pace.

But I think what one of the things you're seeing is when we when we think about, you know, our credit strategy, it may not be that the end investor is the one buying it. It may be that the protocols and the companies, the neo the neo banks who then have their own distribution are the ones that are gonna be the be the primary users.

Because at the end of the day, the consumer the consumer finance conversation of, like, what what decentralized financial markets powers is is access and a more fair and even distribution of the returns that you're expected to get. Right? And so if you have billions of people who are engaging in stablecoin payments and, and storing their wealth and digital assets in their wallet, you know, they're gonna look for opportunities in that wallet.

They're probably not gonna go into the architecture behind it to go and find those products. And so, I think today, the way the market structure is forming feels a lot like vaults and neobanks and, you know, crypto card providers and others are are likely, you know, part of this new distribution process that's emerging. And, you know, we have conversation with, like, the traditional distribution players who usually market and list funds, and it's a very different conversation.

It's much more fintech, payments focused. Yeah. And I think there's a lot to learn there.

Yeah. So much I would would love to unpack. Maybe this is, like, part two of the conversation. The the one that I think we even get asked a ton in our personal life is, like, oh, man. You guys focus so much on stablecoins. Like, how do I actually end up making money on that? And I think So niche. Yeah. It's it's so niche, and it it is But it's not. Abstract away. Like, what am I gonna go invest in in USDC?

You know, that is, like, the common framing for, I think, I think I think a lot of, you know, call them more, what was the term? Prosumer investors. The they're, you know, they're not institutional, but they're they're more than the average Joe. And I think a lot of that still feel feels very abstract to them.

It it is it is abstract, and because a stablecoin isn't an investment, right, necessarily. Right? It's Yeah. It's a product it's a product that you use to store capital, move capital.

Now that being said, the rails upon which stablecoins move and especially when you think about you know, I know it's up it's up, still up in in debate within the Clarity Act right now, but the ability for this the technology of a stablecoin to deliver rewards, you know, how that translates into how the broad user base engages with the technology really matters. Right? And so, you know, a lot of people go, you know, hey. I leave my money in the bank because I'm expected for it to be safe, number one.

Number two, that they're gonna pay me a yield. And sorry. And that they're gonna pay me a yield. And what what we've probably found out is the banks don't really pay you yields unless you lock up your capital for a long period of time. And, but but the impetus there is that, you know, most investors are comfortable sitting in, you know, a cash instrument like T bills. Right?

The next the next layer of that is kinda how do you think about how you're gonna bring the vast majority of the next billion people into the financial markets. Right? And, you know, clearly, stablecoins have, already accomplished, some level of success in in accessing non US global, providers, so that they can bring so they can participate in this this technology. The next question is, can those same rails be the same distribution rails where traditional securities, traditional funds are offered?

We think that's the case. We think it's gonna be very similar to how stablecoins have evolved and moved around over time.

Yeah. It's it's the history of Coinbase acting as the I was listening to the the system update, I think, yesterday that they came out on the app. It was interesting. I opened my Coinbase app, and then the system update was there. And it was, like, a really beautiful way to engage with what Brian was talking about, and I've never seen, like, the corporate side of Coinbase come into the retail product that way. And it was really interesting to hear about, like, hey.

He flashed up the, like, the very, very first, like, go buy Bitcoin on Coinbase, like, twelve, thirteen, fourteen years ago. It seems like a very interesting and similar moment that stablecoins play with tokenized assets and the just massive aperture that that is. And bit like, similar to what I I think similar to what Bitcoin did for trading crypto is a very similar paradigm, at least in our heads, of what stablecoins as a primitive are doing for tokenized assets of all kinds.

I don't know if you if you have any final thoughts on that point, but, yeah, we can also we can also wrap here. I know we're a little bit over.

I would just say there were there were a lot of really great things announced at the

So many. Showcase.

And so you got Coinbase Advisors, which which is a regulated RIA that is now utilizing LLMs to deliver investment advice. You've got the tokenized equities, which, you know, those are gonna be able to move from the traditional issuer to your self custody wallet. The and then there's a bunch of other things that were announced. The the the thing that the listeners should probably understand is, you know, this is this is exactly the growth of the market structure you should expect.

It went from just Bitcoin to stable coins. Now we're talking about tokenized products, and now we're talking about integrating AI. And at at the end of the day, it goes back to how do you think about designing these products so they can be embedded into protocols, utilized by, by AI, AI agents, utilizing it into commerce, and ultimately leads to a better user experience because you have less friction, more efficiency, more automation in how you deliver those outcomes.

Yeah, man. So cool. Well, part two. We love that. Yeah. We love a part two, man. There's so much to learn from you. Thank you for the the role you're playing, and I know you're traveling a lot. You're speaking a lot, and really helping the market understand what's going on.

I think that you're you're kind of sitting in this really interesting middle between a lot of the crypto native community that doesn't know about the traditional financial space as much and then also the traditional space that you're very deeply experienced with talking with also, like, hey. Here's what's going on with the crazy crypto crowd and all this great stuff that's getting built. So just appreciate appreciate the role that you're playing and would love to keep learning from you on the show.

I think you can provide a ton of insights to those who watch.

Awesome. Well, I appreciate you guys, and and thank you for hosting me. You got it, man. Awesome. We'll chat soon. See you.