Iran Banks to Use National Crytptocurrency

EghtesadOnline: Developed by the Informatics Services Corporation at the behest of the Central Bank of Iran, the banking system is planning to make use of a national cryptocurrency.

News ID: ۷۴۶۲۰۱

10 November 2018

The national cryptocurrency is launched by the CBI and can be transferred from person to person without intermediaries on a distribution platform, the chief executive of ISC said.

Aboutaleb Najafi elaborated that the aim of developing crypto infrastructure is to conduct feasibility studies and assess blockchain technology and cryptocurrencies in promoting financial and payment services in the domestic banking industry at the inter-bank and micro-banking levels, Financial Tribune reported.

Speaking to IBENA, he said the ISC designed and produced the infrastructure of the blockchain platform which includes the national cryptocurrency. The currency is in the pilot phase and will be usable in the banking system after official endorsement from the CBI.

In the first phase, the blockchain infrastructure and the national cryptocurrency will be given to commercial banks for making banking transactions and settlements.

The cryptocurrency will be backed by the national currency, the rial. In exchange for issuing each unit of the national cryptocurrency, its equivalent in rial in the CBI’s account will be blocked. Therefore, issuing such currency will not create new liquidity. On the other hand, the cryptocurrency will be issued on a private blockchain platform and unlike common cryptocurrencies such as Bitcoin, it cannot be mined, he said.

Najafi said the national cryptocurrency is only issued by the monetary and banking regulator which is the CBI and all other cryptocurrencies produced by other institutions are considered as private virtual currency.

In response to reports about the possibility of payments for oil and non-oil exports through digital currencies during the sanctions era, the ISC chief said there are stringent rules and protocols in international financial transactions of that  cryptocurrencies cannot support. For instance, if the volume of exchange surpasses a certain level, the transaction in and of itself will come under the investigation of money laundering and financial transparency requirements.

“It can be said that deploying and implementing blockchain infrastructure in our banking sector will take at least 10 years.”