Diamond Standard Co. has introduced CARATS, an innovative blockchain payment system that aims to overcome the regulatory challenges faced by centralized exchanges and payment services. Unlike traditional platforms, CARATS uses tokenized diamonds, which are backed by real-world commodities, to facilitate payments, remittances, and wealth transfers between users.
With CARATS, individuals have the option to purchase full or partial amounts of these tokenized diamonds, trade them, transfer them, cash out for local fiat currencies, or exchange the token for physical diamonds. To achieve this, Diamond Standard Co. mints physical coins and bars embedded with actual diamonds and an integrated chip that can audit the diamonds and broadcast the tokenized version of the asset on the blockchain.
Users can conveniently send CARATS through SMS or social media platforms, providing a solution for the unbanked to make electronic payments. What sets CARATS apart is that it is not a cryptocurrency but a system that facilitates the transfer of receipts for a physical commodity. This unique feature allows CARATS to bypass the regulatory hurdles typically associated with money transmission services.
Unlike Elon Musk’s X social media platform, which faces similar regulatory challenges, CARATS does not require individual money transmitter licenses in each jurisdiction where the service is active. This means CARATS can function as a payment hub without the burden of acquiring numerous licenses.
Kinney, the CEO of Diamond Standard, acknowledged the difficulties faced by payment innovators like Elon Musk, stating, “Even forward-thinking platforms like Musk’s X struggle to obtain money transmitter licenses in numerous U.S. states and global jurisdictions.”
Centralized crypto exchanges also encounter the same issue of obtaining money transmitter licenses and other permits in every jurisdiction they operate. In some cases, even exchanges with such licenses engage in questionable practices, resulting in their downfall and the loss of customer assets.
Obtaining these regulatory permits can be a lengthy and arduous process. Recently, several exchanges, including IBTCEX, Huobi HK, and QuanXLab, withdrew their applications for operational permits in the Hong Kong market.