The towers of the Israeli diamond exchange in Ramat Gan near Tel Aviv resemble a high-security wing. Cameras monitor the few entrances and exits of the "Bursa", as Israelis call one of the world's largest trading places for diamonds.

The only way in is through security gates, past highly nervous security guards in dark suits and sunglasses.

Crypto currency "Carat

Hundreds of employees sit at small tables in the light-flooded trading room of the exchange. Concentrated, they cut rough diamonds and then sell them as the precious stones that later adorn well-to-do buyers worldwide.

But not only diamonds are traded: The future of the diamond business is also to be created here. Together with the Israeli start-up Carats.io, the stock exchange intends to introduce its own crypto currency, the "Carat", before the end of this year. "As things evolve, we'll be trading the Carat in May," says Nadav Perl, one of Carats.io's chief executives. "At least 50 percent of the currency spent will be covered by diamonds."

Anyone can invest in diamonds

The start-up provides the necessary technology. The company will buy diamonds and store them in one of the many safes on the stock exchange - they serve as a fixed countervalue for the digital currency. "At any time our customers will be able to exchange their'carats' for real diamonds," promises Perl. The stock exchange sent seven billion dollars worth of diamonds (equivalent to around 5.7 billion euros) to the world in 2017 alone.

Coverage of the digital currency should give investors more security and strengthen confidence. Anyone is allowed to buy - investors or private individuals. "With the Carat, we will enable anyone interested to invest in diamonds without actually having to buy any," explains Eli Avidar, CEO of the Israeli Diamond Exchange. "The'Carat' will create a secondary market for diamonds as we know it from the gold business."

Deutsche Bundesbank warns against crypto-assets

Philipp Sandner, a Blockchain expert from the Frankfurt School of Finance, considers the idea to be promising. "If the technical implementation succeeds, an investment in this crypto currency could be an attractive way to invest in diamonds," says Sandner.

However, investments in crypto currencies remain a risk business in view of strong price fluctuations. "It is not for nothing that the German Bundesbank warns of so-called crypto-assets," the expert points out.

"Carat" only a part of the future

Markus Stulle, an expert on crypto currencies from Munich, is sceptical as to whether the concept behind "Carat" will work: "Who should trust an internationally rather unknown institution like the diamond exchange? Investors preferred to buy established Fiat money because the behaviour of the currencies "follows familiar rules of the game and can therefore be easily predicted," says Stulle. Fiat money refers to known currencies without their own value, such as euros or dollars. Their value is determined by government institutions such as the European Central Bank.

The "Carat", however, is only part of the future of the "Bursa" diamond traders' business. With the "Cut", Carats.io has already launched a currency on the market that is, however, only available to traders.

Around 1500 different crypto currencies worldwide

Recently, the idea of a covered crypto currency has become more attractive. Venezuela, which has suffered a severe economic downturn, has launched the "Petro", for example, a crypto currency covered by the country's oil reserves. With the "Petro" Venezuela wants to get urgently needed foreign exchange and fight its economic crisis.

There are currently around 1500 different crypto currencies worldwide. The best known is the bitcoin. However, the value of the nearly 17 million digital units has dropped sharply since the beginning of 2018. One reason for this is the harsh treatment of crypto exchanges by Japanese and American authorities.

German Source Focus online

Translated with www.DeepL.com/Translator