Iran Is Creating Its Own Digital Currency

"Informatics Services Corporation has developed the CBDC platform and over the past two years and the CBI has prepared the infrastructure," Aboutaleb Najafi was quoted as saying by the ISC website,

A pilot model of the digital rial is ready, Najafi said,  "considering the substantial growth in payments during the last two months of the year, we decided to start the pilot experiment after the Nowruz holidays."

The project is expected to be up and running in the next calendar year. "The digital rial is one factor…social, economic and legal parameters of such a move must be studied thoroughly.” 

Banks will get involved in the digital rial process in the second phase, he said. "Banks need to start developing wallets and payment apps to be able to offer services at the opportune time.” 

The ISC unveiled some details of CBDC project on Tuesday stressing that that it will not to be used for bypassing the US sanctions. 

"The digital rial will help ease cashless payments and diversify payment tools and innovative services," Davoud Yaqoubi, head of the ISC blockchain department, said. 

"It is not designed to compete with global cryptocurrencies. Unlike bitcoin and other cryptos, CBDCs are centralized…It is not anonymous and will be fully in accord with the anti-money laundering requirements," Yaqoubi added. 

It considerably reduces money circulation costs, he stressed.  "It will help improve financial inclusion and acts as a powerful tool for the CBI to compete with other stable coins used globally." 

Earlier this week the CBI said it has completed infrastructure for the digital rial. "The currency will be launched after approval by the Money and Credit Council," the CBI deputy governor for innovative technologies said, noting that the CBI prefers CBDCs to cryptocurrencies.

Growing Interest

Interest in CBDC has been growing globally in response to changes in payments, finance and technology, as well as the disruption caused by Covid-19. 

A 2021 survey by the Bank of International Settlements of central banks found that 86% are actively researching the potential for CBDCs, 60%  experimenting with the technology and 14% are deploying pilot projects. 

So far about 55 countries are working on the proof of concept of CBDCs. Nine countries have fully launched digital currencies. Nigeria is the latest with its e-naira.

According to the Atlantic Council, 14 countries, including China and South Korea, are now in the pilot stage with their CBDCs and preparing a full launch.

However, there are several challenges, and each one needs careful consideration before a country launches a CBDC. Citizens could pull too much money out of banks at once and purchase CBDCs, triggering a run on banks. 

Centralizing, through the government, a system designed to be private may produce backlash from users and create cybersecurity risks. Regulatory processes are not updated to deal with the new forms of money and need to be made more robust before adopting the technology.

The International Monetary Fund has published several reports on the benefits, risks and challenges of CBDCs.

CBDCs are expected to help boost competition, reduce transaction costs, expand access to services and encourage financial participation via mobile devices, according to the IMF. 

But the IMF says it also can reduce the ability of local governments to conduct monetary policy and control domestic finances.

However, “without appropriate measures, foreign CBDCs could facilitate illicit flows,” the international lender said, adding that this will make it difficult for regulatory authorities to enforce exchange restrictions and capital flow management measures.