Brazil’s second-largest coffee grower cooperative, Minasul, launched the world’s first green coffee-backed cryptocurrency, Coffee Coin, at the beginning of July. Cryptocurrency trading has dominated financial news in recent months, but is considered to be highly speculative because they lack intrinsic value – they have no substance, and only have a value because a speculator thinks the price will go up.
Coffee Coin, however, is a tokenised commodity, meaning it is a cryptocurrency token that represents real-world goods. This way of tokenising a physical item opens up sectors to investors who might not normally have access.
Available on a specialised platform called Exchange Stonoex, the value of one Coffee Coin is pegged to the price of a kilogram of commodity green coffee. It’s backed by the coffee holdings of Minasul, which has 6,000 members and receives coffee from more than 150 cities in Minas Gerais. The coffee stock at any one time affects the number of Coffee Coins on the market.
Luis Henrique Albinati, Minasul New Business director, explains that Coffee Coin is a stable coin, as it’s connected to an actual asset, with the floor of the price always being equal to the price of a kilogram of coffee, at a moment in time. While there is a minimum price, theoretically there is no maximum price on the secondary market and Coffee Coins could be sold at a premium to the value of the underlying coffee asset.
However, no matter what the price is in the secondary market, you will always be able to redeem Coffee Coins for cash from the cooperative or its relevant value in actual coffee. In the latter case, the cooperative established a minimum amount of 1,500kg of green coffee that can be traded with Coffee Coins.
Albinati believes that this coffee-backed cryptocurrency is a viable option for foreign investors. He stated:
It’s a great investment opportunity for those searching for marketability or a long-term investment. You won’t have the same gains of bitcoin because the spread is smaller. Coffee Coin is an investment that I find safe and conservative.
This new tokenised commodity could potentially have a significant impact on the way investors invest in coffee and coffee businesses to reach potential buyers. People are able to own a stock of coffee with just a push of a button. With the current boom in interest in cryptocurrency this year, Coffee Coin’s launch might have been timed quite perfectly.