Private equity firm GSR Capital has signed up Overstock.com subsidiary tZERO to design a token for trading cobalt.
Overstock has stated on December 17 that the move can result in the tokenization of about $200 million worth of rare metal, which is utilized in manufacturing electronic car batteries, in 2019.
However, this development has caused the deferment of Hong Kong-headquartered GSR’s separate agreement. GSR has earlier revealed that it will invest up to $404 million in Overstock and tZERO.
The deal has been slated to close on December 15. However, one day before that deal was sealed, Patrick M. Byrne, CEO of Overstock, stated in a written message addressed to shareholders on Monday that “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.”
Regretful about the deal, Byrne told investors:
“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.”
Despite this, he is now optimistic about the idea of tokenizing cobalt trading, even stating that it is “one of the most exciting initiatives on the blockchain today.”
GSR and tZERO claim that the token is set to comply with regulatory requirements, as well as streamline the identification, purchase, and tracing of cobalt supply. According to a separate press release, Overstock says that tZERO is expected to offer its know-how to “build an ecosystem in Asia for tokenized commodity purchase contracts.”
In the press release, Byrne says:
“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.”
Overstock and GSR state that in the long run, their partnership can lead to the creation of a security token trading platform similar to that of tZERO in Hong Kong.
In the statement, GSR Capital chairman and founder Sonny Wu says:
“GSR and our partner will be doing more than just cobalt tokenization, and we see further growth in our partnership with tZERO including consummating an investment directly by next quarter.”
Over the recent years, cobalt trade has proven to be a contentious topic because of the fact that although cobalt is used in powering innovative industries like electric car manufacturing, over half of the world’s supply originates from the Democratic Republic of Congo, a country notorious for exploiting child labor in mines. Notably, China has been actively purchasing cobalt producers and has received a lot of flak for fostering unsafe production methods.