Iran Tends To Build A Central Bank Digital Currency :
Central bank digital currencies (CBDCs) are now a topic that has piqued the interest of various countries in the world. In fact, due to the sanctions coming from the US, Iran has suffered significant economic and financial challenges. They believe that establishing a CBDC will allow them to defeat the blockade’s problems. Moreover, a CBDC is also seen as a possible answer to the corruption problem which has trailed Iran for decades.
The Road To A CBDC
Iran started the digitalisation journey of its currency in 2018. Meanwhile, under the authority of the Central Bank of Iran (CBI), the Informatics Services Corporation developed a CBDC. According to several reports, this CBDC utilises the Hyperledger Fabric protocol that the Linux Foundation provides. However, both Hyperledger and the Central Bank stated that they have never heard about this.
Ghazizadeh, CEO of Exchange Iran (EXIR), said that the infrastructure, possible supervisors, and the formal white paper, have not been confirmed by the government yet . However, he also added, “The closer the day, the more information will be provided.”.
Power Problems Negatively Affect The Progress
Iran was one of the leading nations that approved that bitcoin mining is legal. They believe that this can help them alleviate the country’s financial crisis. However, catastrophic droughts caused continuous blackouts, and then the sanctions were applied. The Iran government had no choice but to temporarily cancel all mining operations.
Cryptocurrency Is Used To Enhance Global Trade
Iran has currently appreciated the potential of cryptocurrencies, which is really efficient in promoting international trade. According to a report of Coindesk, in the first quarter of 2020, 1,000 crypto mining licenses were approved by this country. Besides, last month, after a discussion between the Iranian Central Bank and the Ministry of Trade, the central bank’s payment system was finally integrated with a trading system that business’ payments with digital assets.
Alireza Peyman-Pak, Iran’s Deputy Minister of Trade and Development, declared that the crypto payment system would be ready in a few weeks. However, he also added that the government needs to seriously consider the commercial and economic prospects of the cryptocurrency industry.
A Challenge In Search Of A Solution
In this technology era, fast transactions have become more and more popular with individuals. Besides, banks always strive to take a leading role in facilitating payments. This, in reality, has enhanced the non-stop growth of the payment system. Hence, building CBDCs is considered a good way to benefit the public.
Federal Reserve Bank Governor Christopher J. Waller revealed in his speech that CBDCs are “solutions in search of a problem.” He clarified, “One could argue, for example, that the general public has a fundamental right to hold a riskless digital payment instrument, and a CBDC would do this in a way no privately issued payment instrument can,”. Besides, according to him, commercial bank accounts already provide the general public with a risk-free digital payment tool for the great majority of transactions, thanks to government deposit insurance..
If the CBI’s proposal to trial the CBDC succeeds, Iranians will be able to use digital currencies to facilitate smooth local and international trading.
