Over the past weekend, a series of events occurred that have shaken the financial industry, with several investment banks going bankrupt and even the USDC stablecoin losing its peg against the dollar. In the midst of this chaos, a new asset class has emerged: tokenized diamonds.
According to CoinDesk reports, the sales of digitized diamonds have soared by 300%, led by Diamond Standard. The company’s founder and CEO, Cormac Kinney, has confirmed that the trading volume has been so high that the Diamond Standard Spot Market had to remain open non-stop.
The majority of buyers have reportedly been looking to move away from exposure to stablecoins, with Kinney explaining that sales of tokenized diamonds and other commodities have increased substantially since Friday due to the government’s ruling to close Silicon Valley Bank and Signature Bank, the USDC de-peg and fears of contagion to the detriment of other banks and digital assets.
Tokenized diamonds are a new asset class developed by blockchain company Diamond Standard, which has described itself as a producer of the world’s first diamond commodities. The firm has tokenized the diamond market, making it easy for investors to invest in the mineral. The company collaborates with supervisory authorities, auditors and financial sponsors to ensure maximum transparency.
The value of this type of investment is best understood in times of great market volatility and uncertainty, when investors tend to focus on solid assets to protect the value of their capital. Kinney has explained that the majority of clients who work with the firm aim to hold the asset long-term, seeing it as an opportunity to diversify and secure their portfolio.
The US banking sector has been hit hard by recent turmoil, with three major bankruptcies occurring: Silvergate, SVB and Signature Bank. Interestingly, Diamond Standard still primarily trades with Signature Bank, while having commercial agreements with a few other banks. Kinney believes that Signature is currently “the safest bank in the world” given that the new interim entity will be the Federal Deposit Insurance Corporation (FDIC) for a time.
The collapse of Signature was the third largest in US banking history, with the closure of Silicon Valley Bank being the second and the collapse of Washington Mutual during the 2008 financial crisis being the first. Along with troubled Silvergate, Signature Bank was recognized as one of the largest pro-crypto banks in the United States.
The emergence of tokenized diamonds as a new asset class amidst the chaos in the financial industry could be a sign of a growing interest in alternative investments that are seen as safe havens in times of volatility and uncertainty.
