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Precious Metals, Diamond Backed Cryptocurrency Launches – What This Means for the G&J Industry

Published Date : Mar 3, 2018

Cryptocurrencies seem to be the most talked about subjects of the current day, first in line being Bitcoin. One of the biggest drawbacks of traditional cryptocurriencies is that they are not backed by anything, and so, price completely depends on what buyers are willing to pay at the time. This has been the main contributory factor for the price volatility most cryptocurrencies have witnessed. Recently, there have been emerging some cryptocurrencies that are backed by solid products like gold, diamonds and oil.

New Gold-backed Cryptocurrency: PerthMint is currently developing a cryptocurrency backed by gold, which will likely be followed by other precious metals. It is expected that this move will bring investors back to the precious metal after the boom in cryptocurrencies. For investors, the plus over other cryptocurrencies will be that while they enjoy the benefits of owning an investment on a distributed ledger, and one that can be sold quickly, there is actually a precious metal backing it.

The blockchain system on which cyrptocurrencies are built, also offers complete transparency and traceability. Chief Executive of PerthMint, Richard Hayes has reportedly stated that the desire to trace gold from mine to processing and end consumer fitted well with blockchain principles.

Hayes said that while there is no announcement for a release-date for the blockchain-allied products yet, he expects that there will be significant steps in the direction over the next 12 or 18 months.

New Diamond-backed Cryptocurrency: Singapore-based Diamundi Pte. Ltd. has launched the first cryptocurrency based on investment grade diamonds. It is called ‘D1’, and is based on Etherium blockchain. D1 is a crypto-token exchangeable for investment grade diamonds. Every D1 is backed by 1/1000th of a carat of a model Standard Diamond: 1 Carat; Excellent Cut; F Color; VS1 Clarity.

D1 is also used for trading and investing, as a medium of exchange and a convenient tool for value transfer.

The physical diamonds are stored in secured vaults in Singapore, and in the future will also be stored in Switzerland.

D1 was originally developed by Diamundi as a product for clients interested in crypro-assets but with additional downside protection.

Go to the following link to see how the D1 ecosystem works: https://www.d1coin.io/ecosystem

Israel Diamond Exchange (IDE) to Launch Cryptocurrency Backed by Gems: Israel’s Diamond Exchange recently announced it is launching cryptocurrency backed by gems, in what it said is a bid to increase trade and make transactions more efficient and transparent.

The cryptocurrency, to be called ‘Carat’, is expected to hit the market around May, and will be used by investors and the general public. A separate one, called ‘Cut’ is already launched – For use between dealers in a market that has often been opaque.

“Twenty-five percent of the value of the Carat would be backed by diamonds listed on the exchange in a bid to reassure investors”, said Eli Avidar, the exchange’s Managing Director.

Venezuela recently announced a new oil-backed / “petro” cryptocurreny, which willhave the backing of 5.3 billion barrels of oil worth $267 billion. The socialist government said the launch is a bid to offset a deep financial crisis. It is hoped the petro will be used as a mechanism to pay international providers, many of whom have stopped supplying to Venezuela given its inability to pay its debts.

How the G&J Industry Will Benefit From Integration of Diamond & Precious Metal Backed Cryptocurrencies into the Financial System:

Within the gems and jewellery industry, the cryptocurrencies can be used for payments for business-to-business and business-to-consumer transactions. For physical stores, this is as easy as creating a cryptocurrency wallet on a smartphone or tablet or purchasing a dedicated Point-of-Sale machine with support for cryptocurrencies. Wide use of these cryptocurrencies as a payment method, will likely result in:

  • Increased demand for precious metals and gems – Investment and physical
  • Increased transparency within the business – financial, social issues, tracing source and entire chain of ownership, etc.
  • Less business fraud
  • In B2B dealings, paying in the very product that is a raw material would act as a hedge against price fluctuations.
  • Good investment opportunity for small investors (Able to invest in part of an investment grade diamond, as one example.)

There still needs to be a mechanism for arbitration in the case of non-compliance, fraud, etc. With Bitcoins, this is not in place. The product-backed cryptocurrencies are still in their very nascent stages. But, laws and systems are likely to be established very soon. 

Backed by blockchain technology, cryptocurrencies seem to be here to stay, and certainly so those backed by strong products. The gems and jewellery industry must be ready to embrace and support cryptocurrencies linked to its own products, especially. The benefits, both individually and collectively will likely be many. 

- By GemAtlas Team