Digital Currency In Exchange For Solid Diamond Jewelry?

Given the huge volatility experienced by bitcoin in recent weeks and months, it was something of a surprise to see a jeweler in London offering customers a digital currency payment option.

Samer Halimeh, a luxury diamond retailer headquartered in Knightsbridge, Samer Halimeh has decided to start accepting bitcoin for the jewelers’ retail services and business-to-business (B2B) gemstone trades. "We are the first diamond dealer and Bond Street level luxury jeweler to start accepting and trading using bitcoins,” Halimeh was reported as saying. “This is because we have seen rising inquiries for this digital currency from clients, suppliers and trading partners.”

He said that the company has up to now dealt with US dollar purchases from clients in the Gulf and Asia. However, over the past 18 months, customers have been acquiring large amounts of bitcoins. Halimeh says an “increasing number of clients” have been asking to purchase goods with bitcoin. This is particularly the case with VIP customers who buy jewelry costing in the millions.

“Because trading and retailing via bitcoins can be done from anywhere in the world, it is especially beneficial for our suppliers in Africa and our clients from developing countries like China, Brazil, South Africa, Nigeria, India, and Uzbekistan,” Halimeh said.  

But might this raise red flags among some governments? JP Morgan CEO Jamie Dimon last week called bitcoin a "fraud". “It’s worse than tulip bulbs and won’t end well,” he said at a banking conference, referring to the 17th century mania over tulip bulbs in The Netherlands which eventually burst and led thousands of investors to lose everything. "Some countries have terrible currencies," he said, citing Venezuela and North Korea as examples, "and in those cases it might be useful to use bitcoin and not their currency." Other states [most notably the United States] which have full control of their currencies, however, will want to know who is using bitcoin and for what purposes and they will want to close it down, he added. They regard it as a novelty, but as soon as it is used for illicit purposes, it will be closed down, he warned.

Bitcoin's price has jumped from $700 to $4,000 since January 2014. It has rebounded nearly $1,000 after a huge plunge last week following announcements by major bitcoin exchanges in China that they planned to close by month-end. Bitcoin and other digital currencies are undoubtedly volatile, with double-digit percentage moves a normal occurrence, thus making the drawing of conclusions on its short-term fluctuations difficult. On the other hand, bitcoin is up 311 percent on the year compared with the Dow Jones Industrial Average DJIA and S&P 500 index SPX which are up a more modest 12 percent or so this year.

In addition to pessimistic remarks from Wall Street heavyweights, bitcoin and other currencies are running into regulatory headwinds. The US Securities and Exchange Commission said in late July that it was monitoring a recent trend of initial-coin offerings, a form of venture-capital raises tied to digital-currency-related enterprises. The SEC issued a report warning investors about the perils of such so-called ICOs:

“We are concerned that the rising use of virtual currencies in the global marketplace may entice fraudsters to lure investors into Ponzi and other schemes in which these currencies are used to facilitate fraudulent, or simply fabricated, investments or transactions,” the SEC’s Office of Investor Education wrote in an investor-advocacy report.

To all of IDEX's friends, colleagues and clients celebrating the Jewish New Year, Shana Tova.