Will Iranian digital currencies become a mainstream by the end of summer?

Soraya Nildarar
Written by Soraya Nildarar

In recent months, digital currencies have attracted the attention of banking and communication authorities in terms of using new technologies to a degree that creating an Iranian digital currency has been mentioned.

According to ISNA; digital currencies, especially Bitcoin and Ethereum, have become a popular topic in Iran. This has led to some informal deals. However, the Minister of ICT has announced the trial implementation of the first native digital currency by Post Bank and that it will be offered to the banking system for verification.

The first step of implementing a native digital currency is taken

Mohammadjavad Azarijahromi referred to digital currencies as an advancement of today’s world, saying that a passive approach towards the technology would cause a lack of progress in the country.

Post-bank of Iran is assigned to invite and identify the elite to design and experimentally implement Iran’s first digital currency, using the existing capacities of ICT in the field of banking and financial system, as well as the high capacity of the young generation. This model should be offered to the country’s banking system for a review and for receiving an approval.

He then argued that there are different opinions about using virtual currencies and that the system needs to reflect on this area before a digital currency is offered:

We are planning to in fact implement a model, which has already been used in Japan so that we can run a pilot model for final decisions, using the existing capacities.

The Communications Minister also talked about the possible mechanism for the trial implementation.

“Cryptocurrencies are not necessarily affiliated with a messenger.”, Azarijahromi said. He indicated that the main factors of these currencies are the encryption process and the algorithms’ implementation.

Do not enter the digital currency space until a policy is affirmed

The secretary of Iran’s supreme council of cyberspace, Seyyed Aboulhassan Firoozabadi, stated:

The central bank of Iran’s officials have not acknowledged entering the cryptocurrency exchange space, yet.

The National Center for Cyberspace is currently reviewing this issue with the central bank of Iran.

We have no control and management over the virtual currency market, and the dealers who are engaged in exchange activities are not licensed. Therefore, we suggest the people not to enter this space until relevant regulations are presented.

The central bank of Iran has also banned domestic banks and other financial institutions from dealing in cryptocurrencies, citing money-laundering concerns first raised in a circular from December 2017. Based on this restriction, banks, credit institutions, and currency exchanges should avoid any sale or purchase of these currencies and not take action to promote them.

The central bank is concerned that all cryptocurrencies have the capacity to be turned into a means for money-laundering and financing terrorism and in general can be turned into a means for transferring criminals’ money.

Bitcoin’s ban does not equal a digital currency ban

Iran’s main monetary and financial authority has outlawed domestic banks and other financial institutions from dealing in cryptocurrencies. But, the communications Minister believes it has not banned the use of digital currencies for domestic development.

Emad Irani, an expert in economic affairs, thinks that the money laundering risk associated with digital currencies has raised contradicting opinions about cryptocurrencies.

An enactment to eliminate the “money laundering” concern

The Deputy of the new technologies department at the Central Bank, Naser Hakimi, has announced that a set of digital currency regulations are to be presented by the end of September. He has Referred to the anti-money laundering high Council’s resolution and the central bank’s Announcement.

The philosophy of issuing this directive is to eliminate the concerns about using digital currencies for money laundering in the country. We hope that the CBI’s cooperation with Iran’s presidential deputy of science and technology leads to an interaction with the lower levels of business. We expect that a framework for using digital currencies be determined as well.

“Half of the global trades will be done through cryptocurrencies, by the coming five years.” The statement was made by Alireza Daliri, the Directorate’s deputy for management and investment affairs.

Some officials argue that by employing a digital currency, the banking process managed by the US Federal Reserve system around the world could be circumvented. Others say that in the next few years, 50 percent of global deals will be done through digital currency, so it’s important that what happened about telegram messenger in the country does not happen again. Some also believe that in the future, a state-backed digital currency can replace the dollar.

Azarijahromi stated in a comment:

Digital currency counts as a platform for transferring funds. Hence, our department is seeking development in this field and is working to use it with the help of competent companies and discussing with the central bank.

Using foreign digital currency trades in small deals can be effective.

However, the central bank does not recognize Bitcoin, Ethereum, and other currencies as legal tender and the Judicial branch of Iran has also blocked access to websites, dealing cryptocurrencies.

At the same time, some believe that in the current economic status and flow of sanctions through Iran, cryptocurrency can serve as a way to bypass limitations and be used by people.

Many have viewed Iran’s inquiry into issuing a state-back digital currency as a response to the country’s own crippling international sanctions.

A legal framework should be presented for Cryptocurrencies

CEO of Iran’s Postbank, Khosro Farahi, has talked about creating a legal framework for Cryptocurrencies.

The minister of communications believes that we should be more involved in the tech community and consider modern technologies, Khosro Farahi stated.

The ministry of communications, Postbank, and the center of information and communication technology (ICT) are seeking the codification of a legal framework for using blockchain and cryptocurrencies, Farahi added.

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Soraya Nildarar

Soraya Nildarar

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