Blockchain is enabling the tokenization of physical commodities such as oil (Venezuela's petro token), real estate and gold (Ekon coin). CARAT token is making its debut this week on Taiwan-based exchange Hotbit and it enables investors to hold digital coins that are backed by real diamonds.
But you may not want to give these tokens to your spouse as substitute for the real thing.
Israeli venture Carats.io is the brainchild of the digitized luxury commodity, and its first exchange listing shows the promise of how blockchain can facilitate efficient cross-border payments and investing in the shiny rocks. Carats.io operates through IDEX, the world’s second-largest diamond trading platform, where the firm purchases $120 million worth of diamonds as physical stock.
The CARAT token is expected to increase liquidity and improve market efficiency in the global diamond industry. It's estimated that $13 billion worth of rough diamonds are produced annually with two-thirds coming from Africa. The firm raised $1.6 million in May.
Company representatives said they chose Hotbit because of surging investor interest in diamonds from southeast Asia, in interview with Finance Magnates. "Our company and our diamond-backed currency are currently attracting significant attention in Southeast Asia because diamonds are seen as an effective bulwark in the escalating trade war between the United States and China. Asians are looking for stable currency alternatives that are not dependent upon the U.S. dollar," said Eli Avidar, president of Carats.io.
There's growing concern among global investors that the U.S. dollar could devalue significantly given its $21.5 trillion debt and massive unfunded liabilities. Moreover, a brewing trade war between the U.S. and China is causing some uncertainty. Finally, countries in southeast Asia such as the Philippines and Myanmar are experiencing high inflation
. Thus, physical commodities that have sustainable value, like diamonds, are being viewed favorably as safe investment vehicles that preserve investors' purchasing power, as well as, hedge in case of another financial crisis.
Last week, Swiss-based Eidoo launched the Ekon coin which is fully-backed by physical gold
that are stored in audited vaults. The ERC-20 token is redeemable for one gram of 99.9 percent fine gold. And the bullion is audited every 90 days. Investors can see their gold deposits through a video camera.
There's strong interest in gold investments from countries that have unstable economies and high inflation. Investors in Venezuela, Argentina, Libya, Angola and Turkey, to name a few, are seeking ways to preserve their wealth. Thus, some have purchased Bitcoin (BTC) and other cryptos.
Turkey, whose economy is in turmoil, has tripled its gold imports in the last seven months of 2017 and it imported 153 tons from January to May 2018, according to Borsa Istanbul. Because of the high cost of storing physical gold and prevalence of scams when it comes to gold certificates, it may make sense to purchase tokenized gold instead, as in the case of Ekon. Moreover, trading platforms give gold investments liquidity in case a token holder needs to cash out.
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