The Central Bank of Iran has 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 (CBDC) project despite rumors and concerns of some crypto experts. No details were announced about the CBDC progress.
Ali Khodaverdian, a lawmaker, recently said that the 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 legal basis."
Khodaverdian, in a talk with the semi-private Mehr News Agency, referred to a Majlis session on the digital currency project. "Based on monetary and banking laws, the CBI is not authorized to utilize non-physical financial instruments. It can only issue physical coins and banknotes."
He emphasized that the legal framework surrounding digital currencies and CBI’s involvement in it should be clearly defined and announced by amending the existing monetary and banking laws.
The Farsi-language Peivast magazine on Thursday quoted an official from the CBI who said that the project has already past its pilot stages.
According to the unnamed official, Bank Melli, Bank Mellat and Bank Tejarat 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 started selling limited amounts of crypto-rial and also accept it.
The Money Reserve Supervisory Board has approved 10 billion rials of Crypto-Rial be minted for use in the pre-pilot phase. The CBI has said that it has in place infrastructure for the crypto-rial that is planned as a new type of national currency, like banknotes and coins, but fully digital.
Based on what is known about the CBI crypto agenda, 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 crypto move seeks to help expand financial inclusion and function as a powerful tool for the 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.
Few Details
The CBI 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 the experts.
CDBCs are to be used for micropayments inside the country, but analysts say businesses are not prepared to accept the new e-currency. Moreover, users' familiarity with digital wallets and its security is not year clear
At the macro level, experts have expressed anxiety about the potential negative impact of the Crypto-Rial on banks.
"Basically banking is a business of financial intermediation…implementing large projects would weaken the role of banks; it would also impact their assets and lending power and ultimately multiply their losses," Ahmad Azizi, a former CBI deputy chief said, Tejarat News reported.
"It seems that the CBI has not fully explained the project to experts as no bank so far has made any statement to this effect," Azizi noted.
Market analysists, developers and e-commerce experts met recently to assess the CBI document on the Crypto-Rial. A glance of their stances and statements confirms Azizi's position about the ambiguities surrounding the project and CBI's inability or unwillingness to set the record straight.
Mehran Moharramian, the CBI deputy for innovative technologies, said earlier that the 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 will be close monitoring of how bank loans are used, which is almost impossible with the existing national currency, the rial."
Abbas Ashtiani, head of the Iran Blockchain Association, has also expressed reservations about the central bank’s approach to blockchain technology.
"The technology is capable of providing a wide range possibilities and features. However, we need to see how the CBI intends to use it, which features would be used and which will be blocked," the Peivast journal quoted him as saying.
On the other hand, there are experts who support the CBI plan. Nima Amir Shekari, an e-banking expert, said the CBDC project would help the central bank, as the regulator, learn more about cryptos.
"Central banks can draw on their experience to propose workable regulations about cryptocurrencies and crypto assets.”
