Majlis Digital Economy Committee has finalized its report on the Central Bank of Iran’s Crypto-Rial (also known as Digital Rial) project, in which CBI is tasked with finalizing it by the end of the current fiscal year (March 19, 2024).
The report emphasizes that the Central Bank of Iran is responsible for regulating and implementing monetary and credit policies based on the country's general economic policies, in accordance with the Monetary and Banking Law of Iran, Way2pay reported.
The report highlights extensive research and empirical studies conducted by the Digital Economy Committee, as well as numerous meetings with relevant institutions and the central bank. Consequently, CBI has been obligated to launch the "Central Bank Digital Currency" (CBDC).
Mojtaba Tavangar, the head of the Majlis Digital Economy Committee, in a letter to the head of the Majlis Economic Commission, said, "According to the decision made by the Money and Credit Council regarding CBDC regulations, dated January 10, 2022, the responsibility of implementing this project was assigned to the Central Bank of Iran. Based on the country’s Monetary and Banking Law, the legal currency of the country is issued in the form of banknotes and coins, and CBDC is considered a banknote distributed digitally through CBI's infrastructure."
Earlier reports had claimed that the digital currency is not designed to compete with global cryptocurrencies. Unlike bitcoin and other cryptos, CBDCs are centralized and designated currencies that accord with anti-money laundering requirements.
Mehran Moharramian, the CBI deputy for innovative technologies, said earlier that CBI's primary aim in developing the Crypto-Rial is to create a new programmable form of currency, known as open money.
"This means that money will have smart features and be multipurpose. A key point is that it will allow close monitoring similar to bank loans, which is almost impossible with the existing national currency, the rial," he said.
CBI had earlier provided some details about the project in a draft of a Crypto-Rial whitepaper. Even though the document contains valid information, it does not really address concerns raised by economists and experts.
CDBCs are to be used for micropayments inside the country, but analysts say businesses are not prepared to accept the new e-currency. However, users' familiarity with digital wallets and its security is not year clear.
The crypto move seeks to help expand financial inclusion and function as a powerful tool for CBI to compete with other stable coins globally.
The digital currency is to be minted in a distributed ledger system, consisting of authorized financial institutions and capable of implementing smart contracts.
Distributed ledger technology (DLT) is a digital system for recording the transaction of assets, in which details are recorded in multiple places at the same time. Unlike traditional databases, distributed ledgers have no central data store or administration functionality.
Suggestions
Elaborating on policymakers’ approach toward minting Crypto-Rial, the report refers to the National Center of Cyberspace’s earlier decision, in which the Central Bank of Iran is required to plan and take actions for the development and gradual launch of the national digital currency.
Tavangar noted that the issuance of CBDC, as one of CBI's tasks for creating an innovative environment, was approved by the government in 2018.
The project is also confirmed by the CBI Fiqh Council which said earlier that "CBDC is legitimate and legal, and the decisions of this council should be observed based on the Sixth Five-Year Development Plan."
The report emphasizes that in order to achieve the targets of the Crypto-Rial project and prevent potential misuse, measures, resolutions and regulations regarding the governance of digital currency need to be established.
The report suggests that in order to enhance the currency’s governance, the Central Bank of Iran is obliged to submit an executive plan to the government within the next three months. After the government’s approval, this plan will be implemented by all executive organizations.
The judiciary is expected to convert all financial judgments and orders into a machine-readable format and provide accurate identification certificates of convicted individuals to relevant institutions, including the banking network, within one year.
This is while Ali Khodaverdian, a lawmaker, recently said CBI should suspend plans to delve into digital currency.
"According to the current monetary and banking laws, the central bank's involvement in the digital currency project lacks a legal basis," he said.
Khodaverdian, in a talk with Mehr News Agency, referred to a Majlis session on the digital currency project and said based on monetary and banking laws, CBI is not authorized to utilize non-physical financial instruments.
He emphasized that the legal framework surrounding digital currencies and CBI’s involvement should be clearly defined and announced by amending the monetary and banking laws.
The Central Bank of Iran last week denied any change in the agenda of the Crypto-Rial project.
According to the CBI Public Relations Department, the regulator is working on its Central Bank Digital Currency project, despite rumors and concerns of some crypto experts.
The Farsi-language Peivast magazine in February quoted a CBI official who said the project has already advanced beyond its pilot stages.
According to the unnamed official, Bank Melli, Bank Mellat and Tejarat Bank were involved in the experimental stages. All banks and credit institutions are to start offering electronic wallets for using the new form of national currency.
Bank Melli and Bank Mellat have already started selling limited amounts of Crypto-Rial and also accept it.
The Money Reserve Supervisory Board has approved the minting of 10 billion rials of Crypto-Rial for use in the pre-pilot phase. CBI has said that it has the infrastructure in place for the fully digital Crypto-Rial that is planned as a new type of national currency.
