Now, a coffee-backed cryptocurrency

A new cryptocurrency is making waves in the commodities and financial markets. It is the Coffee Coin that has made a promising beginning since it was launched in early July.

It is attracting growers, producers and traders of coffee in Brazil, the world’s largest producer of the coffee. Moneycontrol looks at this unusual cryptocurrency.

What is coffee coin?

It is the world’s first cryptocurrency that is backed by physical stocks of green coffee. The value of each coffee coin is pegged to the market price of green coffee but it is also influenced by investment demand. It was launched in the beginning of July 2021 by Brazil’s second-largest arabica-coffee cooperatives Minasul. Coffee Coins can be traded at exchanges, including StonoEx, a partner in the project.

Who uses coffee coins?

Farmers who are members of the cooperative can buy the cryptocurrency against their coffee output in the current season as well as in future. They can trade 30 percent of their current harvest against coffee coins. Farmers can use these coins to buy farm inputs as well as other goods.

Investors can also buy coffee coins and trade them for physical money or green coffee, which must be in lots of 1,500 kg.

Impact on coffee trade

In effect the cryptocurrency allows one to buy stocks of coffee with the push of a button. This can potentially bring far-reaching changes in the way the coffee market and its participants operate in Brazil. Since Brazil is the world’s top producer of coffee, traders across the world are keenly watching coffee coins.

Is it a good investment?

This cryptocurrency is expected to be less volatile because it is linked to the market price of coffee. The value of other cryptocurrencies such as Bitcoins and Dogecoins can be influenced by speculation and at times tweets by celebrities. It is also a safe instrument, having the backing of physical assets and a major coffee cooperative.

How has the price moved so far?

In July, the first month since the launch, the value of coffee coins has appreciated more than 35 percent. This is because bad weather has clouded the outlook for coffee production in Brazil. To some extent investment demand has also helped in the gain.

Can Indian buy coffee coins?

There is no ban on buying cryptocurrency in India, but a lot of regulatory uncertainty exists. There is no law governing cryptocurrencies yet. The government is scheduled to introduce a crypto bill in Parliament.