Diamonds Are An Investor’s Best Friend

Bringing Forth A New Asset Class Through Blockchain Technology

The AssetOnChain team at Gear Up Innovation, Technology and Entrepreneurship in Hong Kong with HKSTP at Wheelock Gallery.

By Min Chen | While diamonds are primarily associated with engagement rings and high-end jewelry, much can be said of its investment value. Due to its inherent high store value and low volatility, diamonds meet the same standards of traditional investments such as gold or equities. In fact, diamonds outperformed the aforementioned assets in the recent global financial crisis. That being said, issues of around standardized grading has kept diamonds off the radar of traditional investors.

Enter Hong Kong-based EverCarat: the first global marketplace that trades investment grade diamonds using blockchain and exchange technology. The platform solves the problem of high transaction costs associated with personal trading, pawn shops, and auction houses, improving price transparency, market liquidity and product standardization–factors that will hopefully put diamonds on its way to becoming an asset class of its own.

The platform uses the Gemological Institute of America’s (GIA) 4C (i.e., carat, color, cut, clarity) grading system to address the issue of standardization. All diamonds that are sold must go through a round of GIA re-verification (as listed diamonds must already be verified), of which they must meet the top five standards for color, clarity, and cut. With regards to carat size, the bigger the diamond, the better the investment.

By standardizing which diamonds qualify to be listed on the platform, the company hopes to attract sellers and buyers who may have previously been turned off by the discrepancies associated with a natural mineral to significantly increase the global transaction volume.

AssetOnChain Founder Rico Tang.

The company was in 2017 founded by Rico Tang and his team. Prior to founding AssetOnChain Technology, EverCarat’s parent company, Tang worked at Hong Kong Exchange and Clearing, Singapore Diamond Investment Exchange, and Thomson Reuters–experiences that would lead him to believe that technological innovation is the driving force behind a more open and transparent commodities industry.

Currently, the polished diamond market is worth US$25 billion, and Tang believes that Hong Kong is well positioned to lead its global expansion for three reasons. First, Hong Kong is the second largest diamond trading market in the world, and the majority of global leaders in diamond cutting have offices here to serve the large percentage of high net worth individuals. Second, it’s the gateway to China, the most upcoming diamond market in the world. Third, Hong Kong’s simple tax regime and developed logistics infrastructure are conducive to building a digital and physical global platform to trade, hold in custody, and deliver diamonds around the world.

Since their launch, EverCarat has signed with leading diamond suppliers in the city and introduced the platform to high net worth individuals. They have also kicked off diamond consignment and GIA re-verification for a number of end-clients. Additionally, AssetOnChain closed its first round of fundraising in 2018 led by ParticleX and received the Cyberport Creative Micro Fund (CCMF) Grant to further accel its growth in the city and beyond. The startup is also a member of the Hong Kong Science and Technology Park’s Incu-Tech programme.

When asked about the implications of the rising popularity of synthetic diamonds such as moissanites, Tang says that since the GIA can tell the difference between the two, the value proposition of natural diamonds will remain irreplaceable.

In 2019, EverCarat hopes to reach their target 1.4 million high net worth individuals in Greater China.

“We hope they will accept investment grade diamonds as a new asset in their portfolio diversification,” says Tang.

Even though his transition from the corporate into the startup world was not an easy one, Tang believes the people he’s met along the way has made it all worthwhile.

He adds: “Some of the skills you develop in the corporate world may become less relevant in the early stages of a startup. It is more important to focus on the people around you and effectively communicate what you are trying to achieve.”