Carats.io, an Israeli blockchain startup with a diamond-backed cryptocurrency, has signed an agreement with financial technology provider Tradomatics.

Underwriting Trades

Under the terms of the deal, Tradomatics will act as a ‘liquidity provider’ for CARAT tokens, said cryptocurrency. This means that it will facilitate the buying and selling of the tokens by holding them in inventory and quoting prices for their purchase and sale, thus underwriting the trades that people make with them.

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According to the announcement, Tradomatics will “maintain the stability and value” of the token by allowing holders of more volatile cryptocurrencies to trade them for CARAT tokens. Members of the diamond industry will benefit because they will be able to avoid the volatility of other currencies by using these tokens instead.

Carats.io President Eli Avidar said: “We selected Tradomatics as our partner because of its proven ability as a market maker and a provider of liquidity in traditional financial exchanges. Our goal is the stability of the CARAT coin. This is the first step in the transformation of the diamond into a financial digital product, which in turn will streamline and grow the diamond market itself.”

Tradomatics CEO Shmuel Tal said: “Tradomatics’ extensive experience in supplying liquidity to conventional security exchanges, in supporting the introduction of a diamond-backed digital coin, will result in the creation a non-volatile financial asset with a high correlation to real-time prices in the diamond business. As such it will serve as an excellent hedge against the risks to which diamond traders are regularly exposed to in the currency markets. The CARAT coin connects the Old World to the New World, integrating them and serving as a leader among the other backed digital currencies.”

Interest in Southeast Asia

This follows last week’s news of the token becoming listed on its first exchange – Hotbit of Taiwan. The management team of Carats.io said that they chose this exchange because of the interest that their company has been receiving from people in Southeast Asia.

The aim of Carats.io is to modernise the diamond trade by introducing liquidity to the market, by way of representing real diamonds with a cryptocurrency. The value of that cryptocurrency, CARAT, is backed by diamonds which are held in inventory by Carats.io. It purchases the diamonds from the Diamond Financial Index, which is the world’s second-largest diamond trading platform.

Carats.io was originally launched in partnership with the Israel Diamond Exchange but switched to IDEX in August because Israel’s diamond regulating body did not grant it a licence to trade in diamonds.

In May 2018, the company raised $1.6 million in a private funding round.