Tokenisation through a start-up called Cedex will be the first outing for the new model
Investors will know , Inc () for its binary and foreign exchange trading platforms.
Regulators, though, have clamped down on binary trading and forex has become fiercely competitive.
Hence, with the advent of blockchain, founder and chief executive Asaf Lahav has taken the business in a different direction.
Diamond tokenisation through a start-up called Cedex will be the first outing for the new model.
Lahav believes this is a market ripe for disruption.
Outside of De Beers or Russian giant Alrosa, few people know the size of the world’s diamond market, he says.
Even fewer can probably tell you with any certainty the value of a diamond.
And that uncertainty is why the diamond market has lagged gold as store of value, Lahav believes.
Cedex wants to change that by analysing the geomological data of a diamond and digitising stones and registering all transactions on blockchain.
Imagine he says, the public being able to buy a small part of a huge pink diamond or to be able to value accurately how much the stone in an engagement ring might really be worth.
“Cedex will bring transparency in a non-transparent market,” he adds and add the liquidity seen in the gold market to diamonds.
Investors down the road will be able to buy tokens in whatever currency they want to carry out transactions.
Demand is clearly there as Cedex raised over US$20mln worth in Ethereum and bitcoin through a ICO/token sale in May to cover development costs.
Eventually, all trading on the exchange will be carried out through these tokens
Cedex is already speaking to the large diamond dealers to supply inventory for the exchange with the platform scheduled to be on line by the end of his year.
But that is just the start. In gold, 80% of the market is accounted for by Exchange Traded Products (ETFs) or derivatives compared to just 1% for diamonds.
Using Cedex’s platform, Lahav eventually sees something similar for diamonds or a market that potentially would be worth billions of dollars in size.
“If you solve the issue of fungibility and transparency in the diamond market, it becomes much easier to store value.
“Diamonds will also become a better solution for institutional investors to hedge positions.”
would also be a major beneficiary.
At present, it has a 2% stake in Cedex but an option to increase that to 90% (87.4% on a fully diluted) over the next two years.
Lahav is keen to point out that there is more to TechFinancials than Cedex, which he says is just a solution to one business problem.
“The infrastructure we have delivered [to Cedex] will serve us in other blockchain orientated projects in 2019.”
He insists TechFinancials is not creating a universal blockchain infrastructure, but a model that can be mimicked in other areas.
“These are business projects.”
Recent numbers reflect the change in emphasis with a profit of US$9mln in the half year to June.
That largely reflected the value of the Cedex option compared to the price paid.
Revenues, though, dropped 46% to US$3.78mln due to the decision to pull out of the binary market.
Underlying losses also rose to US$0.73mln from US$0.17m.
But that is the past.
Going forward there is Cedex (first), around which Lahav has a lot of confidence.
“It’s a good business plan and we know how to execute it.”