Russian diamonds will be digitized

As became known to “Kommersant”, Russia’s first project on “digital diamond” sale based on the blockchain technology may be launched soon. The key asset of “brillcoins” to be circulated by Diamundi Pte Ltd (Singapore) via ICO through “Voskhod” investment system will be ALROSA’s diamonds. It is available material security that made it possible to float an ICO worth $1 billion planned for January 2018.

On Monday, October 2nd, Diamundi Pte Ltd, an investment fund from Singapore, and RTS non-commercial partnership (organizer of “Voskhod” investment system in the Far East) will conclude an agreement on circulation of D1 Coins (“brillcoins” to be issued on Ethereum base) the key asset of which will be ALROSA’s diamonds. “Ъ” was informed about that by the Far East Development Fund (FEDF) which supports this project. “Vladivostok is a strategic city for our partners from China, Korea and particularly Japan who are interested in projects relating to new technologies”, noted FEDF general director Aleksey Chekunkov. “We have received a unique opportunity to capture a niche in the market of crypto technologies, and our “Voskhod”-based project is a serious step forward in this direction”.

Project initiator was Diamundi Pte Ltd. This is a crypto currency fund organized by Hogi Hyun, former managing director of the Asian investment management group of Abacus Capital (with its parent company based in USA), and Bill Claxton, founder of Ledgers, a Singapore-based company operating in IT and block chain technology sectors. By words of RTS head Roman Goryunov, this project can be implemented in any country.

“But, the Far East is the center of Russia’s diamond industry”, he added. “And it is reasonable to create and circulate digital assets based on this natural resource at a Russian site such that project gains might be invested in the national economy”.

Use of the block chain technology for authentication and sale of diamonds and data storage was announced in June by Singapore Diamond Investment Exchange. Diamonds are traditionally an asset difficult for investment uses. However, Roman Goryunov asserts, D1 Coin token will allow for obtaining a “fractional value”. A mathematical formula including all characteristics of diamonds offered for digitization will be a pricing basis for the key asset – token (virtual substitute of “brillcoin”) to be sold via ICO. Gems were evaluated using a neural network. All diamonds have been referred to a conventional unit with a par value of $10. Many parameters were taken into consideration when calculating prices – number of carats, clearness, weight, etc.

The market value of D1 Coin during ICO will depend on demand among investors, Mr. Goryunov stressed. But project participants are optimistic: by Aleksey Chekunkov’s words, they initially planned to float $100 million worth and now consider floating $1 billion. “Ъ” sources say that applications have been received for $400 million. Customers are mostly institutional investors who are clients of Asian banks.

In recent months, the issue of digital assets was actively discussed at the level of the federal government, Finance Ministry and Central Bank. They agree that the crypto market should be regulated but their opinions differ as for the timing and extent of such regulation (see “Ъ” issue dated September 11). A month ago, the Central Bank declared that “operations with crypto currencies imply high risks both in case of exchange operations and fund raising via ICO”. They decided that it is too early to give access to organized trading floors for crypto currencies and any related financial instruments. However, there was no direct prohibition, and the Central Bank approved clearing rules for “Voskhod” in respect of deals with natural resource-based electronic assets (see “Ъ” issue dated September 5).

This project is aimed exactly at offering an asset secured by real values. Diamonds will be stored in special strongboxes in Singapore and later in Switzerland. From there, they will be delivered to customers. “We signed an agreement with Diamundi and operate as a diamond supplier for the project”, says Pavel Vinikhin, branch director of the “Brilliants of ALROSA”. By his words, time of diamonds delivery to strongboxes is within two days and gems have already been prepared.

Exchange of D1 Coins for diamonds will be organized similar to common online shops where customers will be able to choose a gem they like and can afford. “Perhaps, this is not the best way to buy diamonds but this is the most protected method of participation in the market of crypto assets which are not secured in common practices”, Mr. Chekunkov stressed. Pavel Vinikhin adds the diamond supplier “is guaranteed, transparent, known in the market which is confirmed by a certificate”. ALROSA does not reveal its plans on diamond sales volume under this project, and Mr. Vinikhin just specifies that his company will be “one of suppliers”. A project on trading delivery futures for ALROSA diamonds at the Moscow Exchange had been announced earlier but was postponed.