4 July 2018

Blockchain technology is revolutionising the diamond industry


In late May, the diamond company De Beers Group announced that Signet, the world’s largest diamond jewellery retailer, would sign on as the first participant in their Tracr pilot programme.

This initiative uses blockchain technology and has the potential to combat human rights abuses in the diamond trade. Currently, consumers rely on supranational organisations to verify whether they are purchasing conflict diamonds, formally defined as “rough diamonds used by rebel movements or their allies to finance armed conflicts aimed at undermining legitimate governments”.

Thanks to Tracr, consumers will now be able to stop the flow of diamonds falsely certified as conflict-free.

The 2006 blockbuster Blood Diamond, starring Leonardo DiCaprio, brought conflict diamond trade into pop culture. Prior to the film’s release, international law had already attempted to end the sale of these stones. The United Nations General Assembly adopted a resolution in 2000 to create a process to verify the history and origin of diamonds to ensure that they were not being used to fund conflicts.

By 2003, participating countries began implementing rules known as the Kimberley Process Certification Scheme (KPC). The KPC puts extreme verification requirements on its 54 participants in an attempt to ensure their diamonds are conflict-free. However, the actual enforcement is left up to each country, and proof of verification consists solely of a certificate that travels with a batch of diamonds.

Even though member countries represent over 99 per cent of the global rough diamond trade, armed groups in Africa still raise between $3.9 to 5.8 million a year in the illegal diamond trade through fraud, smuggling, and legal loopholes. KPC and other status quo interventions are evidently not stopping human rights violations in the diamond trade.

Part of the failure of KPC is due to fraud and smuggling. Traders have reported incidents of fake certificates in the Democratic Republic of Congo, Angola, Malaysia, Sierra Leone, Guinea, and Ghana. Even without forging documents, smugglers take advantage of unguarded borders to move diamonds across borders to KPC countries and mix them in with local and certified diamonds.

Diamonds are currently certified in batches instead of individually, but with new blockchain-based platforms, single stones can be traced from their mines. This works through an open ledger system in which transactions are added through consensus of the computers on the network. The consensus mechanism makes it difficult to falsify a transaction history and the public nature makes tracing individual stones possible. This reduces the risk of diamonds being falsely certified as conflict-free.

The second reason for KPC failure is its limited definition of conflict diamonds, which only includes atrocities committed by non-governmental forces. Zimbabwe continues to be a KPC member despite their history of human rights abuses.

In 2008, 200 people died due to the government takeover of the Marange mines. In 2009, the KPC Review mission determined that government-controlled mines did not meet the minimal human rights requirements, and the Zimbabwe government was given six months to comply. However, they was allowed to re-enter in 2011, despite reports from human rights organisations that documented continued violence and abuses.

Even with the backing of the United Nations and the buy-in of 99 per cent of the diamond trade, international law failed to ensure that certified KPC diamonds were actually conflict-free. Blockchain offers an opportunity to side-step the failed policy of KPC by making transaction history open and public – consumers and sellers alike will be empowered with the necessary information to prevent the trade of conflict diamonds.

Tirzah Duren is a Young Voice Advocate who focuses on political economy, food security, and trade.