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By Olivia Quiniquini •
3 August 2018
By commoditising diamonds as a financial investment tool and tapping new revenue streams, the CARAT digital currency is expected to bolster demand for diamonds and eventually strengthen prices.
Israeli blockchain startup Carats.io aims to create a secondary market for diamond commerce through its cryptocurrency launching later this year.
The CARAT token commoditises diamonds, making it accessible to new market segments as a financial investment tool. But unlike many other cryptocurrencies, this digital coin is backed by tangible assets with intrinsic value – real certified diamonds that can be fully redeemed for the tokens, according to Carats.io Founder and CEO Avishai Shoushan.
For every token bought, the company buys an equivalent diamond from certified dealers and places it in CARAT’s Brinks safe. It deals in the most liquid and tradable stones on the market: GIA-certified, non-culet round brilliant SI2 to IF diamonds of 0.17 carat to 2.5 carats in D to J colour. The diamond-based digital currency reinforces trust and credibility by having accounting firm Ernst & Young conduct periodic audits on its safe. Eli Avidar, former managing director of the Israel Diamond Exchange, also recently joined Carats.io as president.
“We’re the first to build a financial model for diamonds by combining the stability of diamonds with the liquidity of cryptocurrency, allowing people to invest in the stones without physically holding the product,” explained Shoushan.
CARAT also opens new revenue streams for the diamond industry. According to Shoushan, the token’s pre-launch private sale witnessed robust demand from Asia, Western Europe – notably Germany, France and Spain – and the US. Investors include cryptocurrency players and holders, well-established financial institutions and large diamond dealers. Online retailers are also considering CARAT as a form of payment.
“Cryptocurrency is a US$500 billion market, which is currently limited to exchanges. People now seek to diversify their portfolio and buy tangible products with their digital currency. We are bringing choice, value and trust to that ecosystem. As online retailers accept CARAT as payment, people can exchange their cryptocurrency for our tokens and buy diamonds and jewellery. We are linking the cryptocurrency market to the physical world, ushering in new opportunities for jewellery retailers and the diamond industry, among others,” said Shoushan.
CARAT prices are determined by market forces and thus avoid the volatile fluctuations of other cryptocurrencies, he added. “The more people buy the token, the more diamonds we buy. This new way of trading can double demand for the physical goods and boost prices,” Shoushan continued.