The Central Bank of Iran (CBI) plans to launch a central bank digital currency (CBDC) to modernize the country’s financial system and combat international sanctions.
Mohammad Reza Farzin, Governor of the CBI, announcement this decision was taken on November 25 at the conference on modern banking and payment systems in Tehran. Innovation is essential to ensure a resilient financial infrastructure.
A cornerstone of Iran’s efforts to modernize its banking sector, the digital rial has been under development since 2018. The CBDC, Farzin said, aims to keep Iran’s financial system up to date with international standards while upgrading it. the disposition of its citizens. He declared:
“Our innovation priority focuses on countering external pressures and ensuring the continuity of the financial system,” the Central Bank of Iran said.
The digital rial was built on open source Hyperledger Fabric technology and completed a “pre-pilot” phase earlier this year with the help of several key Iranian banks. In June, the CBI launched its first retail CBDC pilot program on Kish Island, a free trade zone popular with millions of tourists each year. The domestic retail CBDC is currently being developed for non-intermediary functions.
However, Farzin identified ways to minimize the effect of international sanctions on the Iranian economy. It also integrated Iranian ACU payment system with Russian MIR system in October, which expanded the range of cross-border payment options. Farzin said:
“Our ACU-MIR connection illustrates our desire to apply creative financial approaches to continue and grow our economic relations.”
Of note is Iran’s Shetab national payment system, which can process transactions in less than two seconds. Discussions are already underway to further integrate Shetab into MIR, the Russian financial system.
Iran also tried CBDC and cooperated with Russia on gold-backed stablecoin. But they have faced challenges as cryptocurrency exchanges have been hit with heavy sanctions for dealing with Iran under US sanctions.
Iran’s upcoming launch of the digital rial and its work with Russian payment systems highlight a strategic shift aimed at resisting the effects of sanctions and promoting financial independence. Using CBDC technology and cross-border focused fintech solutions, the Central Bank of Iran will strengthen its economy as a more resilient and contemporary financial system platform.