Elikia Diamond, a diamond dealer from Antwerp, launched its first collection of diamond jewelry physically linked to NFTs on the Ethereum blockchain. The goal is to guarantee the authenticity of the jewelry and transparency in the exchanges in addition to funding the modernization of the mine in the Democratic Republic of Congo through the pre-sale of NFTs. The goal of this initiative is to propose a new standard in terms of transparency in the industry.

By leveraging blockchain technology in a new industry, BE Blockchain and Elikia have highlighted the potential for innovation and positive change for the sector.

A market under high pressure

Cases of money laundering, corruption and the financing of terrorism or conflicts in Africa have constantly raised the veil on these practices in this sector. Belgium, and more specifically Antwerp, has often been in the crosshairs. Hans Merket’s report, “Belgium’s Fight Against Conflict Diamonds: An Assessment of the Country’s Diamond Sector Controls from a Global Perspective” provides a comprehensive examination of this phenomenon. Whether it is the “Monstrey” fraud or the “HSBC leaks” and more broadly the confirmation of the money laundering structures revealed in the 2013 Offshore Leaks and the 2015 Panama Papers, these are colossal sums of money that are being discussed…

Since 2018, billions of dollars and euros have been laundered in transactions that involve diamond dealers with drug cartels and banks. The world’s biggest diamond scandal of recent years also has ties to Belgium. It is the Punjab National Bank (PNB) scam, India’s largest fraud case, estimated at $1.8 billion, which was revealed in 2018.

However, efforts have been made, the Kimberley Certification Scheme (KP) was introduced in 2003 to prevent conflict diamonds from entering the regular rough diamond trade. It is a system that requires participating countries to certify that their rough diamond exports do not come from conflict areas. The objective is to prevent the trade in “blood diamonds”. These are mined in war zones and sold to finance armed conflict or terrorism.

However, the KP is not enough because large importers, such as Dubai, are less cautious and more likely to grant Kimberley certification. If trading centers or producing countries with weak internal controls allow conflict diamonds to enter the legal supply chain, they receive the KP seal of approval. Other KP participants can do little to detect it, no matter how stringent their controls.

Indeed, investigations by Belgian authorities are limited to the paper trail that accompanies diamond shipments entering or leaving the country. The complexity of diamond supply chains and corporate structures, which typically span multiple jurisdictions and many complex business relationships, makes it relatively easy for smugglers to conceal wrongdoing and ensure that documents presented in Belgium pass scrutiny.

In terms of public-private collaboration, the Antwerp World Diamond Centre (AWDC) has made considerable progress in engaging industry, which has traditionally been resistant to regulation. However, the AWDC’s influence on the actions of individual companies is limited.

The biggest challenge for Belgian authorities is to detect and prosecute conflict diamond smuggling networks. These networks could exploit loopholes in other jurisdictions to contaminate the global diamond trade — including Antwerp.

The authorities should also include new strategies and efforts to address the root causes of diamond-related conflict and violence along the supply chain.

This lack of transparency about the origin of diamonds leads to a lack of confidence on the part of buyers and ultimately to a decline in the value of diamonds. The market also faces a liquidity problem because the majority of diamond buying and selling transactions are private. As a result, investors are finding it difficult to resell their diamond inventory and to provide authentication documents.

Elikia Diamond: from the mine to the customer…

To address these challenges, non-fungible token (NFT) technology offers a promising solution. NFTs are digital assets stored on a blockchain to verify the ownership and authenticity of both digital and physical objects. In the diamond industry, NFTs can serve as “proof of ownership and origin” to track a diamond’s journey from mine to customer, providing full transparency and traceability. The potential of NFTs in the diamond industry to set a new standard for transparency makes them a promising solution to the challenges currently facing the industry.

Elikia Diamond was founded by Mr. Sese Bomboko, son of Mr. Justin-Marie Lokumba Bomboko, one of the signatories of the Declaration of Independence of the Democratic Republic of Congo. When Mr. Sese Bomboko took over his father’s mining company in 2013, the idea was to start offering diamond jewelry directly from the mine. This led to the launch of the Elikia Diamond Project in Antwerp, Belgium. With complete control of the process from the mine to the end customer, Elikia Diamond aims to bring the mining sector closer to its end customers, and advocate for transparency and traceability.

Mr. Bomboko’s vision is to modernize the diamond industry and set new standards in transparency and market accessibility. He is one of the AWDC’s dedicated ambassadors.

When Elikia contacted BE Blockchain, they were looking for a way to raise funds to upgrade the mine through pre-sales of their diamond jewelry. Initially, their approach was to sell ERC20 tokens that offered discounts on jewelry purchases. Recognizing the problem, BE Blockchain came up with a more effective solution, namely an INO (Initial NFT Offering). The concept is to sell Mintpasses, which provide access to an NFT title to a piece of diamond jewelry. The idea was to replace ERC20 tokens, which lacked utility, with NFTs physically linked to diamonds through a serial number.

A process that promotes transparency

The goal is to organize a sale of a first collection of 2520 Mintpasses, each of which is linked to an NFT. This NFT will be associated with a specific piece of jewelry from the collection that Elikia will produce, much like a gift certificate. At the time of purchase, the buyer has the option to choose a specific category, such as a ring, earrings or pendant, and a quality level from three different options: level 1, 2 or 3, depending on the purity, color and size of the stone. Mintpasses will contain random stones of different sizes and purities, which means that it is possible to buy an exceptional stone, although the 3 levels will prevent too much variation between stones. The randomly selected NFT will be linked to one of the Mintpasses in the chosen quality level and category, creating a unique and transparent pre-funding process for purchasing high quality diamond jewelry.

With Elikia’s solution, all diamonds extracted from the mine in Congo receive their Kimberley certificate and the mining certificate that attests to their origin. They are then sent to Antwerp where Elikia cuts the diamonds with a certified laboratory. It is there that a third document is produced, the laboratory certificate containing the serial number that will be engraved on the diamond itself, invisible to the naked eye. These 3 certificates will be recorded on the blockchain and linked to the NFT title when the jewel is put on sale. The blockchain then allows to trace all the exchanges of the NFT. A database directly linked to each NFT will record the delivery status of each jewel.

In other words, the NFT linked to a piece of jewelry will contain not only the same serial number of the diamond but also its characteristics (caras, size, color, purity) and the 3 certificates. In this way, any potential buyer can be reassured about the origin of the diamond, where some diamonds resulting from conflicts or illegal trafficking have landed in jewelers without being able to trace their origin.

Conclusion

BE Blockchain helped Elikia Diamond propose a new model of transparency and traceability for the market. The integration of NFT technology proved to be a solution that could address the main challenges of the sector, such as the lack of liquidity and the difficulties in providing authenticity documents during the purchase. Of course, the solution does not solve everything, and it will still require the cooperation of the various players to “play the game” of transparency, but it does have the merit of highlighting “healthy” diamonds over others.

Although the diamond industry is known for its conservatism and the team has encountered various obstacles and reluctance, African countries are showing increasing interest in blockchain technology, which would make it easier for them to connect with their end customers. The use of NFTs physically linked to diamonds offers customers the assurance that the stones they are buying are authentic, ethically sourced and of the highest quality. It is highly likely that other diamond companies will adopt similar solutions in the future, making blockchain technology and NFTs an integral part of the diamond industry.

About BE Blockchain

BE Blockchain is a leading consulting firm specializing in the implementation of blockchain projects in a variety of industries. Founded with the goal of helping organizations leverage the potential of blockchain, BE Blockchain has quickly established itself as a trusted partner for companies looking to integrate this cutting-edge technology into their business. With a team of experienced professionals who understand both the technical and strategic aspects of blockchain, BE Blockchain has helped numerous organizations successfully adopt blockchain and achieve their strategic goals. From strategy development to implementation and ongoing support, BE Blockchain provides end-to-end solutions to help organizations leverage the full potential of blockchain and Web3