The IDE penned an agreement with startup company Carats.IO—owned by Gabriel Diamant—that has developed the technological infrastructure for trading the coin while using IDE data.
Virtual currency have become rather widespread over the past few years, and just recently it was announced six major banks—including Credit Suisse, Barclays and HSBC—will come together to produce their own virtual currency in 2018.
IDE President Yoram Dvash hopes their new currency will be considered an attractive avenue of investment even for people outside of the diamond trade.
The Diamond Exchange entered the project intending to encourage diamond trade and purchases in Israel. Trade in the currency will be done based on an index built on the fluctuations of diamond purchases in the Ramat Gan diamond market.
The currency will be issued and traded in a digital currency exchange, possibly in Switzerland, over the next three months. During the first stage of trade in the currency at least 25% of its worth will be backed by diamonds—that is, the issuer will be obligated to hold and purchase diamonds as securities for the currency—up to a backing level of 75%. The value of each coin will be one American dollar.
Of the world's 800 currencies, only few of them are backed by actual properties. "The coin will transform diamonds into a 'commodity' and bring in investors who have never invested in diamonds before," Dvash said.
"We've been trying to make diamonds tradable in different financial settings for years now, but we have thus far been unsuccessful in that endeavor," he noted. "So we decided to bring in outside involvement. Bringing new investors into the diamond trade in Israel is crucial both for the country and the local diamond market, and we intend to avail ourselves of the best and brightest in order to achieve that goal."
"Security for investors"
"The diamond trade may well serve as an investment avenue for digital currency investors," said startup Carats.IO, "and the project is attractive to them because the coin's issue is backed by diamond purchases."
"Digital coin traders are an ever-growing population in the world," the company said, "and backing the coin with diamonds will increase investors' trust in it considerably. Collaborating with the Israel Diamond Exchange is a meaningful step in the right direction."