Diamond Standard Co. Introduces CARATS: A Blockchain Payment System Using Tokenized Diamonds
Summary:
Diamond Standard Co. has launched a blockchain payment system, CARATS, which utilizes tokenized diamonds to circumvent the regulatory challenges often encountered by centralized exchanges and payment services. These tokenized diamonds can be traded, transferred, and cashed out in local currency, or swapped for physical diamonds. CARATS allows for transactions via SMS or social media platforms, providing an avenue for the unbanked to engage in electronic payments. By functioning as a channel for physical commodity receipts, the platform bypasses the need for a money transmitter license in every jurisdiction.
Diamond Standard Co. has launched a novel blockchain payments system, CARATS, which leverages tokenized diamonds to bypass regulatory hurdles typically encountered by traditional centralized exchanges and payment services. Users can purchase, trade, and transfer these tokenized diamonds, cash them out in local currency, or exchange the token for the actual diamonds from which they derive their value.
The company accomplishes this by producing physical coins and bars embedded with real diamonds and a chip that audits the diamonds and records the tokenized asset on the blockchain. An image demonstrating the functionality of Diamond Standard's physical diamond coins and bars is available in the CARATS white paper.
Users are able to send CARATS via SMS or social media platforms. This open access design provides a route for the unbanked to participate in electronic payment systems. As CARATS represents a method of moving physical commodity receipts rather than a cryptocurrency, the platform sidesteps the normal regulatory confines experienced by money transmission services, thus permitting the operation of CARATS without necessitating money transmitter licenses in every jurisdiction it operates in.
X, a social media platform spearheaded by Elon Musk, has been grappling with equivalent regulatory issues in its endeavor to integrate a payment system. In 2023, it secured money transmitter licenses in 11 U.S. states, yet, to be fully operational, it needs to acquire a license in all 50 states and every other country where its money transfer service would be functional.
Diamond Standard’s CEO Cormac Kinney opined that conventional money transmitters, due to legal and regulatory impediments to payments and money transfer, often neglect modern available tools. He underlined the regulatory difficulties faced by innovative payment pioneers like Musk, with his X platform being unable to secure a money transmitter license in several U.S. states and numerous international jurisdictions.
Strikingly, this regulatory hurdle is also faced by centralized crypto exchanges aiming to acquire money transmitter licenses and other certifications for operation in each jurisdiction they provide their services. Despite having these licenses, some centralized crypto exchanges have engaged in dubious practices, leading to their collapse and loss to their customers' assets, as seen with FTX in 2022.
Applying for these regulatory licenses is often a lengthy and stressful process. Recent developments saw IBTCEX, Huobi HK, QuanXLab, and four other exchanges withdraw their applications for operational licenses in Hong Kong.
Published At
5/21/2024 9:35:00 PM
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