The central bank’s digital currency project, known as crypto-rial, will not replace the banking system and is being designed to add smart features to the currency.
"Our 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 be equipped with smart features, which can be used for several purposes such as monitoring how bank loans are used, which is almost impossible with the prevailing national currency" Mehran Moharramian, the deputy for innovative technologies at the Central Bank of Iran, was quoted as saying by IBENA.
Moharramian referred to the gradual use of cryptocurrencies by the public and said the CBI wants to make use of the newly created opportunity, and CBDCs are up front for making the best use of new technology.
"Today, we see the emergence of decentralized finance technology bypassing centralized approaches," he said, "Tokenized currencies are a must for surviving the new wave."
DeFi — short for decentralized finance — is a new vision of banking and financial services based on peer-to-peer payments through blockchain technology.
Via blockchain, DeFi allows “trust-less” banking, sidestepping traditional financial middlemen such as banks and brokers.
"Programmable money will be an inseparable part of the future of finance.”
The CBI plans to launch the crypto-rial by the end of summer, the bank governor Ali Salehabadi said last month.
CBDCs are being created to help central banks strike a balance between the current financial system and the coming decentralized setup, Moharramian said.
The crypto-rial is planned as a new type of national currency, like banknotes and coins but would be completely digital.
Based on what is known so far about the CBI crypto initiative, the digital currency is not designed to compete with global cryptocurrencies. Unlike bitcoin and other cryptos, CBDCs are centralized, not anonymous and in accord with anti-money laundering requirements.
The move seeks to help improve financial inclusion and act as a powerful tool for the CBI to compete with other stable coins used 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 the transactions and their details are recorded in multiple places at the same time. Unlike traditional databases, distributed ledgers have no central data store or administration functionality.
In 2018, the Informatics Services Corporation (ISC), the executive arm of the CBI in charge of the local banking automation and payment services network, was tasked with developing the cryptocurrency.
Interest in CBDC has been growing globally in response to changes in payments, finance and technology, as well as the massive global disruptions caused by Covid-19.
