Iran，one of the countries to test a National Cryptocurrency

2022-02-24, 09:08

[TL;DR]

1. Iran to test a national cryptocurrency
2. Iran's stock market should be rebalanced thanks to blockchain technology
3. Iran: Crypto payments for international trade
4. Can Iran's National cryptocurrency escape US sanctions or fight inflation?

According to a senior official at the Central Bank of Iran, the pilot phase of the country's digital currency project will begin soon. The Islamic Republic aims to join a growing group of countries that want to use a sovereign currency as well as implement blockchain technology in other areas.

Iran to test a national cryptocurrency

The Iranian central bank's digital currency (CBDC) will be piloted in the near future, according to a senior representative of the financial regulator quoted by Iran's Labor News Agency (ILNA). The announcement came four years after the project was first unveiled.

According to Mehran Moharamian, deputy governor for information technology, digital currencies are a way to rectify certain anomalies and decentralize resources. CBDCs have already started to benefit other countries, he added.

Moharamian did not say when the pilot phase would begin or how long it would last. In 2018, the Iranian government tasked the country's Computer Services Corporation with producing a "national cryptocurrency." The CBI's branch is responsible for bank automation and the payment services network in the country.
The Iranian digital currency was created using the Hyperledger Fabric platform, which is an implementation of the blockchain framework and one of the Hyperledger projects hosted by the Linux Foundation.

Iran's stock market should be rebalanced thanks to blockchain technology

Besides mining, Iran's cryptocurrency industry remains mostly unchecked. Another story this week claimed that officials were looking at different methods to mine the technology behind cryptocurrencies like bitcoin.

The capital market in Iran should seriously explore the implementation of blockchain technology, according to Majid Eshqi, chairman of the Iranian Securities and Exchange Organization, as it can help solve some of the stock market's most pressing challenges and offer new avenues for its revival. He told SENA and the English-language business newspaper Financial Tribune, as quoted by SENA and Financial Tribune: "At least in two years. Physical assets and easily transferable shares will be tokenized in no time."

He went on to suggest that now was the time to look at the possibilities of blockchain technology to solve some existing problems, such as authenticating the identity of shareholders and starting the infrastructure process.

Iranian media said in early January that Tehran would allow local companies to use cryptocurrency in international settlements with their foreign partners. According to reports, the central bank and the government of the sanctioned country have approved the establishment of a framework to allow digital currency payments in international trade.

Iran: Crypto payments for international trade

According to a recent report by the Mehr news agency, the CBI and the Iranian Ministry of Commerce have reached an agreement that will allow businesses to settle international payments using digital currencies. According to reports, the authorities have finalized a framework for settling international transactions using digital assets.

"We are working to finalize a system-wide operating mechanism. Importers and exporters should be able to use cryptocurrencies in their international transactions through this agreement," said Alireza Peyman-Pak, Iran's deputy minister of industry, mining and trade and head of the Trade Promotion Organization of Iran (TPO).

According to a recent article published by the Tehran Times, Iran wants to launch the trial phase of its national cryptocurrency in the near future. Central Bank of Iran (CBI) Deputy Governor for IT Mehran Moharamian highlighted the potential benefits of cryptocurrencies in the country's financial sector.

Digital currencies, according to Moharamian, are a remedy for the discrepancies in the financial system. For several years, the CBI has been working on a national cryptocurrency.

While Iran encourages the use of digital assets in the sector, its officials have recently taken action against the illegal mining of cryptocurrencies. Iran banned digital currency mining in May 2021, just before the country's peak electricity demand season.

Can Iran's National cryptocurrency escape US sanctions or fight inflation?

All companies and financial institutions that transact in dollars, gold, silver or rial (the Iranian national currency) with Iranian companies or banks are subject to US sanctions. To defeat this circumvention attempt, the US could simply add cryptocurrencies to the list. Also, as blockchain lawyer William O'Rorke, legal advisor to the Kleros project, suggests: "I don't see how a centralized cryptocurrency (like an ordinary currency) could avoid being subject to the extraterritoriality of the US law. And I find it hard to believe that any bank in the world would want to risk a legal battle with the US government over these issues." Total and PSA will not return to Tehran as a result of such a project, nor will it encourage international banks to do business with Iran again.

Others believed that the real purpose of this currency was to combat the inflation caused by the US sanctions. As the reinstatement of these sanctions loomed in July, the value of the rial was already in free fall. Iran's goal, we believe, was to build a cryptocurrency (or stable currency) outside the international monetary system that would be immune to US coercion.
A stable cryptocurrency, on the other hand, does not mean "one that does not fluctuate in absolute terms", but is linked to a stable reference currency, such as the euro or the dollar, or to financial algorithms that ensure its balance.

According to the SAI, Iran's cryptocurrency will be linked to the rial.This theory is rejected outright by William O'Rorke: "In practice, Iranians or any bank will have no more confidence in this cryptocurrency than in the rial". It is not the central bank's manipulations that will make the difference. Iranians are primarily looking to secure their funds by buying US dollars or, to a lesser extent, bitcoin.

Conclusion

Iran hopes to encourage innovation in the financial services sector by launching a national cryptocurrency. In an article, the Tehran Times stated that "The Central Bank of Iran's IT Services Company, which is responsible for the country's banking automation and payment services network, has been tasked with designing a national cryptocurrency in 2018. The Iranian cryptocurrency was built using the Hyperledger Fabric platform, according to company insiders. "

Author: Victor KOMBOU, Gate.io Researcher
*This article represents only the views of the researcher and does not constitute any investment suggestions.
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