Unlocking Natural Demand: Unite Behind a Diamond ETF
February 13, 25
(In association with Diamond Standard) - The natural diamond industry is at a critical juncture, as prices continue to plummet. The spread of cheap lab-grown diamonds is undermining the value and reputation of natural diamonds, confusing consumers who mistakenly assume that lab-grown diamonds are equivalent - just cheaper, and even more ethical. The truth is that lab-grown diamonds mimic natural diamonds and leverage their reputation, but are not scarce and contribute relatively little to the economy. The deception threatens millions of jobs, and the value of every diamond already owned by consumers, retailers and the midstream. If this challenge is not addressed, natural diamonds will permanently lose value. The industry needs to clearly differentiate natural diamonds from lab-grown to reinvigorate demand. Many propose to increase advertising, without identifying a source of funding. But category marketing could easily backfire in this new age of social media backlash. Consumers reject hype. The solution is obvious when you compare diamonds to precious metals. They are all demanded by investors, who consistently acquire 33% of gold and 15-19% of silver, platinum, and palladium, keeping prices in line with inflation and supporting their reputation. Meanwhile diamond prices are at a 25-year low, and massive excess inventory continues to build, to the detriment of all industry stakeholders. A wave of bankruptcies seems inevitable. The good news is that diamond vendors and mines can restore the reputation and demand for natural diamonds by supporting an exchange traded fund (ETF) - and Diamond Standard already has approval. An ETF will quickly position diamonds as an investment asset, and unlock more sources of demand: Diamonds are the ideal asset to support Islamic finance - which prohibits the lending of money with interest - and a digital commodity currency. Best of all, highly visible investor demand will give jewelry retailers the selling point they desperately need. Consumers will observe that only natural diamonds are useful to investors and for modern finance. Real facts, as opposed to manipulative marketing, will support the long-term value of diamonds, to drive up demand and profits over time. The opportunity: Diamond Standard has approval to file a diamond ETF. Only one ingredient is needed - $200 million of initial assets to meet listing requirements and achieve the size needed to attract institutional investors. The proposal: to form the initial AUM (Assets Under Management), Diamond Standard is purchasing excess inventory from mines, manufacturers and dealers in exchange for ETF shares. Post IPO, the ETF will purchase a projected $3 billion of diamonds from participating vendors. Diamond Standard is already making diamonds an investable asset class for individuals and institutions with four different investment products including its Diamond Standard Coins, pictured above, all backed by physical natural diamonds. Why the Diamond Industry Needs an ETF The challenges facing the diamond industry today are falling demand and excess supply. Even if consumer demand improves, vendors will struggle for years as excess inventory destroys profits. By investing a small fraction of inventory into an ETF, we can unlock new demand (from investors, consumers and others) and increase the value of everyone's remaining inventory. For the first time ever, institutional investors can allocate to diamonds like gold and silver. Both metals were in a severe slump, and their ETFs led to an increase in prices. A diamond ETF can do the same. Investor demand is especially attractive to the diamond market - it is not seasonal like jewelry, and is proportional across all the various diamond qualities. The ETF assets can't return to the market since investors sell their shares instead of selling diamonds. This ensures price stability and creates lasting demand. Past ETF Success Stories: Gold (2002): After 12 years of declines, gold ETFs restored the reputation of gold as a reliable hedge, and led prices to surge from $400 per ounce to $2,800 today. Silver (2006): A silver ETF increased investor participation, pushing its price from $7 per ounce to nearly $50 in 2011, and over $34 today. Uranium (2021): Institutional demand for the uranium ETF passed $7 billion, leading to a 300% price appreciation over three years. How Vendors Can Participate To list the ETF and attract institutional investors, it must first collect $200 million of AUM before an IPO. Here's how vendors can get involved: Register at https://diamondstandard.co/ETF Submit a list of inventory to sell to the ETF in exchange for shares (min $500,000). We will tell you the value based on the number of commodities we can make. Provide all types of polished round natural diamonds between 0.18 to 2.05 carats, D to L color, Flawless to I1, VG-EX make (GIA Certs above $500 per carat). We need broad assortments, but keep your best goods and invest the hard to sell items. Receive ETF shares based on the number of commodities created from your inventory (at a 10% premium on wholesale). Your shares can be sold after a holding period. Get a Right of First Refusal to sell up to $3 billion of diamonds to the ETF for three years, as it sells new shares. The first purchase of diamonds will be right after the IPO. Buy shares to own the ETF manager (3.5% of inventory co-investment required) to fund logistics and legal, then earn ETF fees and the proceeds from its future sale. VIDEO LINKS Cormac Kinney, Diamond Standard's CEO, introduces the Diamond Standard ETF to Sightholders and answers questions about why Sightholders' support for an investment product is essential to re-establish natural diamonds for consumers. The ETF Enables New Uses for Diamonds: Islamic Finance and a Digital Currency The unique properties of diamonds - as a densely valuable natural resource that can be sealed with wireless electronics for authentication and electronic transactions - enable entirely new use cases for diamonds. The diamond ETF provides a market-traded pool of commodities that can be lent to banks and currency dealers to support two emerging applications: Islamic finance and a breakthrough digital commodity currency. Islamic Finance The Islamic faith prohibits the lending of money with interest, so over $3.5 trillion of Islamic loans are processed using a commodity trade, known as "Commodity Murabaha". In essence, banks lend commodities, which are sold to obtain proceeds, with repayments made over time like any other loan. Gold and silver are considered money, so banks use platinum and nickel, which are difficult to audit or deliver. Islamic authorities have ordered an end to their use. Diamond Standard commodities solve this problem. They can be easily stored, audited and efficiently traded, making them the ideal asset for Islamic finance. Carats: A Digital Commodity Currency Backed by Diamonds. Over $2 trillion has been invested in Bitcoin and $200 billion in stablecoins, but these have major drawbacks. Virtual currencies are useful for illicit activities and private payments, but cannot be integrated into social applications like Facebook, Twitter, or video games - because global money transmitter regulations require hundreds of licenses. Also, virtual currencies (even gold and silver tokens) are prohibited for Islamic applications, restricting 25% of the world's population. Again, diamonds provide the ideal solution. Carats are the digital currency issued by Diamond Standard commodities. Unlike virtual currencies, Carats have tangible asset backing, and unlike stablecoins, they are issued by a commodity and not by a sponsor that might go bankrupt. Carats are exempt from redundant regulations, so they can be integrated into global applications more easily. These new applications, where natural diamonds are the ideal solution, are expected to increase demand for this diminishing natural resource, and support their long-term value appreciation. Why the Diamond Industry Must Act Now By investing excess inventory to support the launch of the Diamond Standard ETF, the diamond industry can take control of its future and restore demand for natural diamonds. A successful ETF will: Differentiate natural diamonds from lab-grown Unlock new long-term demand from investors Enable diamonds as the ideal asset for modern Islamic finance and as a digital currency Protect the value of $10 billion of diamond inventory, and $1 trillion owned by consumers Diamond Standard has already laid the groundwork - the final step is gathering the initial assets. About Diamond Standard Thousands of investors, family offices and funds own Diamond Standard commodities, which are approved for CFTC (Commodity Futures Trading Commission) regulated futures and now an ETF. See Wall Street Journal (2) (3), Financial Times, CNBC, Bloomberg (2) (3), Forbes and more. To learn more about Diamond Standard please visit https://diamondstandard.co Vendors can sell diamonds to the ETF at https://diamondstandard.co/ETF