Iran Finalized the Development of Rial Backed National Cryptocurrency

According to a local media report, Iran has finalized the development of its national cryptocurrency. The cryptocurrency will be backed by local fiat currency Rial. When the Central Bank of Iran (CBI) approves the uses of national cryptocurrency, it will be issued to financial institutions such as banks to test payments and internal and interbank settlements.

Seyyed Abotaleb Najafi, the Chief Executive Officer of Informatics Services Corporation (ISC) said that

“The state-backed cryptocurrency can be used in a distributed and one-to-one framework for transferring without any institute’s interference.”

Informatics Services Corporation is an Iranian banking and payment solution provider which was founded in 1993. The central bank of Iran signed a contract with Informatics Services Corporation to design and develop a national digital currency. The new digital currency will help in expanding banking system services and circumvent the United States economic sanctions against Iran. Recently the United States announced severe economic sanctions against Iran to cut the rest of the world off from the oil, shipping, and gas market of Iran. In May this year, the United States targeted Iran’s currency, aviation industry, and other sectors. After the recent announcement, some of the cryptocurrency exchanges such as Binance and Bittrex unofficially dropped Iran after the United States imposed stringent sanctions against the oil-rich Middle East country.

Also read: Binance and Bittrex Cut Ties with Iran

According to Najafi, the national cryptocurrency is still in a pilot phase. The main reason behind developing the national cryptocurrency is to explore the capabilities and usefulness of the digital assets and blockchain technology which can facilitate financial payments, retail banking, and bank to bank settlements. Najafi said that

“After getting Central Bank of Iran’s approval [it] will be used in the country’s banking system … in the first phase the blockchain banking infrastructure will be granted to Iranian commercial banks to use it as a token and payment instrument in transactions and banking settlement.”

According to Najafi, the national cryptocurrency of Iran is backed by the local fiat currency. Currently, the official rate is around 42,000 rials to the USD.  Najafi said that

“For Iranian national cryptocurrency, the rial has been chosen as support, namely in exchange for each single national cryptocurrency unit, its rial equivalent in the central bank’s account is blocked. Therefore, it never creates liquidity.”