London - The world’s biggest diamond producer is turning to the technology behind bitcoin to track gems from mine to retailer.
De Beers is running a pilot scheme using blockchain to create a virtual ledger of diamond sales. The technology made famous by the cryptocurrency is also seen as having the potential to reshape industries from finance to retailing. It will enable De Beers to show transactions to all participants while keeping their identities and the value of the sales hidden.
The move could reassure buyers that the stones they are purchasing are neither synthetics being passed off as real nor so-called conflict diamonds - gems used to finance war, despotism or terror. It could also reassure bankers, who’ve been stung by fraud in a business cloaked in secrecy and where loans are often based on paper invoices that can be open to manipulation.
“The benefits for the industry are potentially significant,” De Beers CEO Bruce Cleaver said in an interview on Tuesday. “If the pilot is successful, then we’ll work out how to roll it out in a bigger way.”
The entry of fakes and conflict stones into the supply chain has hurt diamonds’ reputation and may have contributed to lower prices, but efforts to trace the provenance of gems have been thwarted by the business’s long tradition of concealment.
From old to new
Most trading, cutting and polishing is dominated by Jewish and Indian dynasties based in centuries-old hubs such as Antwerp and newer rivals such as Mumbai. Traders stick to the old ways, and the prices gems command remain a closely guarded secret.
While blockchain technology offers a way to overcome some of these stumbling blocks, obstacles remain. Rough diamonds can be cut into multiple polished stones, and De Beers, a unit of Anglo American, hasn’t yet worked out how to ensure the same stone is digitally tracked.
“We’ve spent a lot of time thinking about how you can triangulate the polished back to the rough,” said Cleaver. “That’s the area that’s going to require the most amount of work.”
For the system to work, it will require cooperation from people who are used to traditional methods. It’s unlikely the industry will give up its secrets easily.
“In this pilot we will work through with participants what is desirable to show consumers,” said Cleaver. “We’re very focused on maintaining confidentiality if that’s what participants want.”
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER