An Argentinian company that is creating a cryptocurrency to tokenize grain by the ton has inked an important deal that will see its soy-, corn- and wheat-backed coins accepted as loan collateral by banking giant Santander.
Agrotoken’s three commodities tokens, agrotoken SOYA, agrotoken CORA and agrotoken WHEA, are each backed by one ton of grain held in a storage facility.
By tokenizing their crops, farmers can use the cryptocurrency in four ways: trading them on a traditional commodities exchange; trading them on a cryptocurrency exchange; using them as collateral for loans; and paying for agriculture-related goods and services at participating merchants.
Farmers receive agrotokens in a digital wallet, but they can also receive a closed-loop debit card with a balance based on the value of those tokens, which is accepted by participating merchants.
Agrotoken has launched in Argentina and plans to expand into Brazil and the U.S. later this year. The three countries together account for a solid majority of the world’s wheat, corn and soybean production, it said. Paraguay and Uruguay are also on the horizon.
The company was recently the subject of a case study by Accenture, which said it was bringing “new financial options to the multi-trillion-dollar agribusiness sector by letting farmers convert tons of soybean crops into a commodity-backed stablecoin that could be spent with merchants and investors.”
Longer term, the company plans to move beyond grains into other agricultural commodities, offering Tokenization-as-a-Service (TaaS), Accenture said.
On Credit
On the lending front, Agrotoken has launched a 1,000-farmer test with Santander.
Farmers will be able to take out loans backed by their agrotokens that are repayable in either the cryptocurrency or cash. The goal, Accenture said, is to develop “a token-collateralized loan system that would allow farmers easy, fluid access to a new system of credit at competitive rates.”
Calling the project the first to use cryptocurrency tokens backed by agricultural commodities as lending collateral, Santander said in a blog post Monday (March 7) that the project uses an innovative digital solution that “will allow farmers and the agro ecosystem to have easy and fluid access to a new financing system, expanding credit capacity by using tokenized grains.”
Farmers generate tokens by selling their crops to participating grain elevators, which validate the existence of the commodity.
The loans will be made on a blockchain, with the token locked into smart contracts, Agrotoken. The SOYA, CORA, and WHEA agrotokens were listed on Matba Rofex, an Argentinian commodities derivatives exchange. That was a key to getting the lending project started.
“If the tokens were not listed, a bank like Santander would not be able to operate with them,” Agrotoken Co-Founder and Chief Technology Officer Ariel Scaliter said.
Commodity-Backed Stablecoins
Agrotoken is calling its three cryptocurrencies stablecoins, which is arguably something of a misnomer, as the cash value of an agrotoken will fluctuate with the price of the underlying commodity.
But it has stable value in that one token represents one ton of soy beans, corn or wheat.
Stablecoins are one of the most controversial parts of the cryptocurrency industry, with regulators and elected official in the United States, European Union and throughout the world calling for strong regulations, fearing they could let people bypass the nation’s financial systems.
See also: President’s Working Group: Stablecoin Risks Warrant Legislation
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