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Blood diamonds – the blockchain can stop the trade

Blood diamonds that finance wars. Inhumane working conditions in mines. The diamond industry has more than one problem. But consumers want clean stones. Tokenization and blockchain can stop the trade in blood diamonds thanks to transparent supply chains.

The term “blood diamonds” first appeared in 1975 in connection with the civil war in Angola. The country has a significant diamond deposit. The rebels financed their weapons from the illegal trade in the stones – for decades. In 1998, the UN imposed a trade embargo on diamonds from Angola, neighboring Congo and Sierra Leone. The hope was to stop wars financed by conflict diamonds.

In the decades that followed, the diamond industry tried to get to grips with the matter by means of quality seals and agreements. This was the only way to convince consumers and buyers in America, England and around the world in the future. Today, tokenized diamonds not only provide a new investment alternative. In combination with blockchain technology for transparent supply chains, diamond tokens also offer the possibility of getting a grip on the conflict stone problem via digitalization.

The Kimberley Process: losing the battle against conflict stones?

In 2003, diamond-producing countries and the UN declared war on blood diamonds with the Kimberley Process (KP). The KP defines these stones as “rough diamonds illegally mined by rebels in conflict areas whose export finances weapons to overthrow legitimate governments.” In 2007, people rejoiced that the era of blood diamonds was over. However, human rights organizations have repeatedly criticized the overly narrow definition, which takes neither child nor forced labor into account. Amnesty International noted considerable human rights violations in the diamond industry as recently as 2015. In 2019, the World Diamond Council (WDC) also admits to serious problems.

Customers don’t want blood diamonds

Edward Asscher, president of the World Diamond Council, said at an international meeting in June 2021 that the constant stream of negative headlines threatens the future of the entire industry. After all, he said, the value driver for diamonds is customer demand. And customers would expect the stone they buy to have a sustainable positive impact and to come from legal sources. The Kimberley Process, he said, must therefore work harder to promote human rights, environmental protection and social justice. “Not only do we risk losing relevance if we don’t. Natural diamonds could eventually become irrelevant as a product. Because customers have alternatives,” Asscher warned.

Diamond jewelry on the ear of a woman.
Blockchain could stop the blood diamond business.

Morally sound alternative: lab stones

The diamond industry is often in the crossfire of criticism in America and England. The trade in tokenized diamonds has also been affected. But there are positives to note – as the figures from show:

  • 5 million people have access to healthcare through income from the diamond industry.
  • 81 countries have committed themselves to the requirements of the Kimberley Process.
  • 10 million people benefit directly or indirectly from the diamond industry.
  • 99 percent of all diamonds worldwide come from productions that have signed up to the Kimberley Agreement.

More transparency through EU supply chain law

In principle, it is simple: the identity, origin and processing of a diamond must be traceable throughout the entire supply chain. Many are hoping for a breakthrough from the EU supply chain law. However, it is causing conflicts before it has even been passed. Germany has had national legislation since June. Starting in 2023, it provides for heavy fines for large companies in Germany if their foreign suppliers commit human rights violations. Critics, however, complain that the German bill, which was supposed to be a blueprint for the EU version, is a compromise and not far-reaching enough.

Portrait of Federal Minister Gerd Müller

If you buy a diamond ring in Berlin today, they can tell you which Sierra Leonean mine the stone came from. In the age of digitalization and blockchain, that’s possible.

Gerd Müller, German Federal Minister for Economic Development and Cooperation

Using DLT to combat blood diamonds

What the industry needs are transparent methods for tracing. That’s exactly what London-based startup Everledger is developing. The company uses DLT blockchain technology in combination with artificial intelligence (AI) and Internet-of-Things (IoT) technology. Thus, it creates a “digital twin” for each diamond. This is stored securely and unmanipulable on the Everledger platform. Relabeling blood diamonds into legally traded stones is not possible thanks to blockchain technology.

Sierra Leone leads by example

It seems the African diamond industry is facing up to the problem of conflict stones. German Development Minister Gerd Müller reported on his visit to Sierra Leone during an interview at the German Economic Forum in early July. Blood diamonds and child labor in the mines have been an issue here for decades. Müller toured the government certification body and was impressed: even the poorest country in the world manages to certify supply chains. “If you buy a diamond ring in Berlin today, they can tell you which Sierra Leonean mine the stone came from. In the age of digitalization and blockchain, that’s possible.”

Thanks to Blockchain better working conditions

In Congo, too, the diamond business has always been tainted with blood. The country was among the top 3 diamond producers in the world in 2020. Berlin-based supply chain analytics specialist RSC Global has developed a blockchain solution to trace raw materials. In cooperation with the Congolese government, they plan to use it in the fight against blood diamonds. The operators of the state-owned diamond mine Societe Miniere Bisunzu want to use blockchain tracking to ensure that their diamonds are mined under humane working conditions. For this purpose, each gemstone receives a digital tag via the platform that documents the supply chain.

Morally impeccable alternative: lab stones

Those who want to be sure not to buy a conflict stone will find in lab stones the alternative for a clear conscience. These diamonds come from artificial production. State-of-the-art technology creates conditions in the laboratory that are similar to those found in the earth's interior during the natural formation process. Under high pressure of up to 60,000 bar, a synthetic diamond is created from graphite at a temperature of more than 1,500 degrees Celsius. It has the same physical and chemical properties as a natural stone. It is also visually indistinguishable. The big advantage of the laboratory stone: it sparkles without people having to work hard in mines to get it

FAQ – Frequently asked questions

Where does the term blood diamonds come from?

The term “blood diamonds” first appeared in the 1970s. During the Angolan civil war, rebels bought their weapons with illegally mined stones. Conditions for the miners – many of them children – were inhumane. The “conflict diamonds” financed bloody wars for decades. Illegal mining of diamonds continues to this day.

How can blockchain stop the trade in blood diamonds?

With transparent supply chains. Blockchain technology makes it possible to trace the origin, properties, processing steps and ownership at any time. Every stone gets its “digital twin” that is safe from manipulation. This means that blood diamonds no longer have a chance of reaching the consumer undetected.

What is the industry doing to prevent the trade in blood diamonds?

The Kimberley Process (KP) was launched in 2003. It is a voluntary commitment by the industry to prevent the trade in blood diamonds. However, human rights organizations criticize that the measures are not far-reaching enough and that illegal traders can easily circumvent requirements.

Sabine Melichar

Editor | MBA University of Cologne / San Diego State University.
Main focus: Tokenization | Enterprise Digitization | Vocational Education | Society

Sabine Melichar

Redakteurin | MBA Universität Köln / San Diego State University
Schwerpunkte: Tokenisierung | Digitalisierung von Unternehmen | Berufsbildung | Gesellschaft