Sunday, May 9, 2021

Blockchain Promises to Solve the Problem of the Blood Diamond Trade

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The trade in blood diamonds, also known as conflict diamonds, has continued unabated for several decades despite producers, manufacturers, and governments implementing several steps to resolve it. Now, blockchain technology is offering a solution to end the problem.

Blood diamonds and the Kimberley Process

The UN defines blood diamonds as those that “originate from areas controlled by forces or factions opposed to legitimate and internationally recognized governments, and are used to fund military action in opposition to those governments, or in contravention of the decisions of the Security Council,” according to CNN.

In 2000, states in South Africa met at Kimberley to find a way to stop the trade of blood diamonds. This led to the set up of the Kimberley Process Certification Scheme (KPCS), formed by an agreement between multiple members, including the European Union, United Nations, World Government Council, interest groups like Global Witness, and around 74 other nations.

As part of the agreement, all members must certify that the diamonds they are trading have been produced through legitimate mining and sales. Members are forbidden to trade with non-members. The idea was that the Kimberley Agreement would eventually lead to low demand for blood diamonds, thereby reducing problems in the affected regions.

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The idea was that the Kimberley Agreement would eventually lead to low demand for blood diamonds, thereby reducing problems in the affected regions. (Image: Screenshot / YouTube)

However, many believe that the Kimberley Process has failed to produce any tangible results. Last year, IMPACT, an NGO from Canada, decided to depart from the Kimberley Agreement precisely for this reason. “There’s no meaningful assurance that a diamond is conflict-free… The public is under the wrong impression that the problem is solved,” Joanne Lebert, executive director at IMPACT, said in a statement (Coinwire).

According to estimates, almost 133 million carats of rough diamonds are mined every year. Africa produces 65 percent of these diamonds. Given that only about 25 percent of the diamond mines in Africa are regulated, this would put a large number of diamonds in circulation being potentially sourced from mines that practice slavery and other inhumane practices.

Human Rights Watch has highlighted the drawback of the Kimberley process. “It relies on an indefensibly narrow ‘conflict diamond’ definition that only focuses on abuses perpetrated by rebels, ignoring those of state actors or private security firms. For example, the Kimberley Process has authorized exports of Angolan and Zimbabwean diamonds despite their being mined under highly abusive conditions,” the organization stated (HRW).

Blockchain solution

In 2018, De Beers, the largest producer of diamonds in the world, announced the launch of its Tracr Project as a way to end the blood diamond trade. Built on blockchain technology, Tracr assigns a unique ID that records a diamond’s properties like color, clarity, and carat. The data is saved in an immutable ledger and can be verified at every step of the diamond’s movement, from the mine right into the hands of the retailer.

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In 2018, De Beers announced the launch of its Tracr Project as a way to end the blood diamond trade. (Image: Screenshot / YouTube)

“The Tracr project team has demonstrated that it can successfully track a diamond through the value chain, providing asset-traceability assurance in a way that was not possible before. This is a significant breakthrough made achievable by the close engagement of the pilot participants who share our commitment to industry progress and innovation…” Bruce Cleaver, CEO of De Beers Group, said in a statement (Coin Telegraph).

Since De Beers supplies roughly one-third of the global diamonds by value, the company’s Tracr program is expected to make a significant dent in the trade of blood diamonds. Tracr was developed in collaboration with five other leading diamond manufacturers — KGK Group, Diacore, Venus Jewel, Rose Blue NV, and Diarough.

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