Private equity firm GSR Capital has hired tZERO, an Overstock.com subsidiary, to develop digital token for trading cobalt. Overstock said that this step is specifically towards the tokenization of $200 million worth of this rare earth metal.
Cobalt is one of the key materials in the making of electric vehicle batteries. Overstock CEO Patrick M. Byrne also expressed enthusiasm over this new engagement involving the tokenization of cobalt. Byrne said that this “one of the most exciting initiatives on the blockchain today.”
Delaying Previous Investments in tZERO
The latest announcement of cobalt tokenization comes at the cost of delaying the closure of GSR’s previous agreement. Earlier, GSR agreed to invest to invest up to $404 million in Overstock and tZERO. The transaction closure for the same was to happen on December 15th.
However, “GSR contacted us and asked for an extension to allow a key partner in the cobalt initiative from outside of China to participate in the deal,” wrote Byrne in his private letter to shareholders. Byrne further added,
“Even though the partner in question is well known to us and will be a valuable part of our ecosystem, it was both frustrating to us, as it likely is to you, that the delay came at the eleventh hour.”
Addressing Challenges of Global Cobalt Trade Using Blockchain
The global Cobalt trade has been through several controversies in the last few years. The Democratic Republic of Congo, famous for child labor, caters to more than half of the global supply. Cobalt producers are often charged for using unsafe industry standards, with China being the most accused.
The blockchain technology holds the potential to bring transparency in the cobalt mining sector. Blockchain can help to detect illicit activities at the mines and register them on the decentralized database.
In a separate press release, Overstock assured that the token developed by tZERO and GSR will be compliant with the regulatory requirements. It also said that tokenizing Cobalt will help to simplify the identification, purchase, and tracking its supply.
“Smart contract automation of these transactions will significantly reduce overall costs while effectively improving transparency in rare earth metals purchases throughout the supply chain process,” Byrne said in the press release.
Overstock and GSR also see a long-term partnership in the development of a security token trading platform. GSR Capital’s chairman and founder, Sonny Wu said, “GSR and our partner” will offer “more than just cobalt tokenization, and we see further growth in our partnership with tZERO including consummating an investment directly by next quarter.”
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