Reeling under fresh sanctions imposed by the United States, Iran is in the process of developing its national cryptocurrency to avoid the economic impact.
Rial Backed Cryptocurrency
The Central Bank of Iran (CBI) has decided to launch a cryptocurrency backed by the local currency Rial. To develop the solution, the Central Bank has engaged a local fintech firm Informatics Services Corporation (ISC).
According to local news outlet IBENA, Seyyed Abotaleb Najafi, CEO of ISC said that the CBI intends to leverage new technologies to expand banking system services. Najafi noted that the cryptocurrency, which still has not been given a name, will be issued by the regulator and will enable money transfers in a distributed and a one-to-one environment without the interference of any institution.
The Motive Behind the Move
The goal of building the infrastructure, according to Najafi, is to evaluate the use of blockchain and cryptocurrencies for improving payment services between different banks and in retail banking.
However, it also appears that the intent is to find a way to circumvent the economic sanctions imposed by the US last week that will hit oil exports from Iran. An earlier round of sanctions imposed in May has already impacted the Iranian economy with the Rial losing its value significantly and inflation rates rising.
Najafi did not talk about the expected timeline for the launch of the platform. However, he did mention that the cryptocurrency is in the pilot stage and that, after approval from the CBI, will be deployed in the country’s banking system. The first phase of the rollout will be within the Iranian commercial banks who would use it as a mode of payment for transactions and for banking settlements.
The national cryptocurrency, it is reported, would be pegged to the Iranian Rial one-to-one and the Central Bank would hold reserves equal to the amount of cryptocurrency issued.
Najafi stated that while the country’s electronic banking services are well developed, they are still far from digital banking processes:
In order to realize renovation and create new infrastructure in our banking system, banks’ back end processes which is still in paper and traditional way should be changed and evolved.
Iran is not the only country which is working on a national cryptocurrency. Venezuela has already launched its national Petro cryptocurrency in an attempt to recover from its economic crisis.
Do you think creating a national cryptocurrency will help Iran combat the impact of sanctions? Let us know in the comments below.
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