Non fungible tokens (NFT) representing diamonds have made their way to the OpenSea marketplace.
In the past, there have been quite a few attempts to tokenize diamonds and other precious stones and metals. But Icecap founder and CEO Jacques Voorhees says the problem with previous attempts was they treated diamonds as fungible commodities, which they are not.
He told Cointelegraph that when he first heard about NFTs from his son Erik Voorhees (CEO of ShapeShift), it all came together. “They're as different as a snowflake,” he said. “All the efforts to try to create fungibility with a non fungible item, have ended up failing. And even though they've thrown blockchain technology at it, they still have yet to meet with success.”
“I've seen this going back all the way to 1972 when the West Coast Commodities Exchange tried to create fungibility and diamond futures contracts. The thing lasted about three days and the market fell out because the contracts weren't actually similar.”
NFT representing a diamond. Source: Icecap.
Eric Voorhees promised to buy a diamond
Before they are tokenized, all diamonds are certified by the Gemological Institute of America (GIA) and are then sent to the Gem Certification & Assurance Lab (GCal) , which audits the GIA certificate and provides a guarantee:
“So if it's ever found that their grading was not accurate, they will pay the difference in price and then they back that up with an actual insurance policy that covers them in case they have to pay out on that.”
The problem that Icecap solves is that it is currently almost impossible for retail investors to sell diamonds without a steep discount as there is no secondary market. According to Voorhees, this is an untapped $10 billion opportunity, even if initially it will be a small niche market, mostly inhabited by crypto millionaires and early adopters. Voorhees says that Erik, who invested in the company, also promised to buy a diamond on the OpenSea marketplace.
Icecap doesn’t foresee regulatory issues
After thorough consultations with his attorneys, Voorhees does not believe that the NFTs representing diamonds present a regulatory challenge:
“They've looked closely at what we're doing and exactly how we're handling the title transfer and how we're handling the collection of sales tax issues like this. They've asked a lot of questions. Their conclusion is that it seems that there's no regulatory issue right now.”
He added the lawyers had advised to proactively reach out to all of the potential regulatory agencies in any case.
Erik Voorhees said recently that now is the time to invest in “real assets”. According to Jacques Voorhees, ShapeShift may enable trading of NFTs soon.