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Russia’s Diamond-Backed Cryptocurrency

diamond

In 2017, cryptocurrencies became a household name mainly due to the surging price of Bitcoin. Bitcoin was able to hit almost $20,000 that eventually got the attention of governments. By 2018, there were two common reactions by governments to cryptocurrencies. One, there were countries such as China that tightened up their rules in order to prevent capital outflow. And number two, there are countries such as Venezuela that even developed a cryptocurrency that is backed by oil.

Blockchain technology is quite disruptive considering the many potential applications that it can offer to the table. Recently, Russia has thought of using cryptocurrencies in order to sell a digital token that is backed by Siberian diamonds. This allows investors to buy a share in diamond for as low as $10.

However, this move by Russia received mixed reviews from experts. Experts called it the future of investment while others called it a major risk to investors.

In the coming months, Russia is planning to do some experimental transactions in order to test the limits of the innovation. In addition to this, it is also going to test the regulatory tolerance made for cryptos.

Chief executive of the Far East Development Fund, Alexei Chukenkov mentioned that “We think we have several trillions of dollars’ worth of valuables in Russia’s Far East”.

Traded on Online Exchanges

How exactly does it work? The tokenized assets will be traded using digital tokens on online exchanges. This means that instead of using physical assets, a digital receipt will be used in order to represent the shares. And in addition to this, it will make use of a public ledger in order to record everything from ownership to its price. And because of this, it is secure and it can’t be tampered.

Lex Sokolin who is the global director of fintech strategy for Autonomous Research said that “Asset-backed tokens, for diamonds or Venezuela’s petroleum, are exploring the conceptual space of what’s possible with blockchain”.

Growing Number of Countries Exploring Blockchain Tech

Venezuela, in fact, has turned its $5 billion petroleum reserve into Petro. However, Venezuela is still facing problems as the US is also putting pressure on European countries to not transact using the cryptocurrency.

Aside from Venezuela, Malaysia is already exploring the use of blockchain technology as well. A similar project but a gold-backed token in Malaysia called HelloGold is also making wave today.

What Makes It a Bad Call?

Is it a wise decision to invest on asset-backed cryptos? For its critics, it can be considered a risky one mainly because it requires a third party such as auditors. This links the digital asset and the real one. According to law firm Jones Day in a white paper that it published, outside parties must “verify that the digital token is, in fact, backed by the same value of assets or currency as is purported”.

However, the diamond token called D1 is already trying to answer this problem. The company that is going to issue the token, Diamundi, which is a Singapore-based diamond group, said that the diamond stock will be audited monthly by a Big Four accounting firm. It is also going to be held in vaults of Israel custodial group Malca-Amit.

The Russian fund will also simply source the diamonds from Siberia but it will not be involved in any way when it comes to the issuance of the token.

Mark Ayesa

Mark manages our editorial team, social handles and is always on the lookout for great writing talent to contribute to our site. On a day-to-day basis he ensures the content on CryptoCurrency365.com is of the highest quality and also carries out extensive research on any current hot topics of the crypocurrency world for our writers.

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