Key Takeaways:
- On Thursday, the Central Bank of Iran is reportedly going to begin testing a central bank digital currency.
- The digital rial is intended to “transform banknotes into a programmable entity,” according to the national bank.
The decision to start a pilot project to introduce the crypto-rial as the bank’s digital currency as of Thursday was made by the Central Bank of Iran (CBI), which made the announcement on Wednesday.
The declaration comes after the bank published a draft paper outlining the objectives, constraints, risks, and potential outcomes of the development of a digital trial in August.
The crypto-rial has been developed so that it is simple to trace and that it can be tracked even if the data on the smartphones is compromised.
The crypto-rial, which would be entirely digital but look like banknotes and coins, is anticipated as a new variety of the national currency, according to past CBI pronouncements.
Virtual money is not meant to be a rival to other local or global cryptocurrencies. As opposed to other cryptocurrencies, central bank digital currencies are centralized, non-anonymous, and compliant with anti-money laundering laws.
The open-source commercial blockchain platform Hyperledger Fabric, created by US technology behemoth IBM, was used to create Borna, the basis on which the digital rial will function.
It uses permissioned distributed ledger technology (DLT), which prevents mining like Bitcoin and many other decentralized cryptocurrencies and allows only the central bank to determine which businesses will have accessibility.
Abdolnaser Hemmati, a former CBI governor, said that the organization has already developed a “basic version” of a digital trial in May 2021.
The CBI, currently led by Ali Salehabadi, claimed earlier this month that the bank already had the infrastructure and rules necessary for a CBDC in place.
It should be mentioned that Iran is one of the nations that the United States has sanctioned. The nation has long been subject to one kind of US sanction or another. It has thus seen cryptocurrency as a way to get around those measures.
Iran placed an import order earlier this year for $10 million, to be paid for in cryptocurrency. Even the use of cryptocurrency in trade and imports was permitted by the state.
The state is therefore familiar with crypto and its applications. It is therefore not surprising that the nation is advancing with its CBDC objectives.
According to Saeed Khoshbakht, who was involved in developing Borna, “At least four more nodes will be assigned to manage the distributed ledger for the time being. It’s true that they are also banks, but the data will now be spread among at least five points, and if the experiment is successful, that number might gradually increase.”
