The Central Bank of Iran has completed infrastructure for minting crypto rial as a central bank digital currency (CBDC). The currency will be launched after approval by the Money and Credit Council, the CBI deputy governor for innovative technologies said.
“Regulations to this effect have been finalized and approved by the CBI board of executives, but MMC’s approval is necessary,” Mehran Mohrammian was quoted as saying by peivast.com.
Mohrammian noted that that the CBI prefers CBDCs to cryptocurrencies and is determined to implement the plan. He did not provide details.
Earlier the CBI said it was trying to develop a national cryptocurrency to promote financial and payment services in the domestic banking industry in the inter-bank and at the micro-banking level.
The International Monetary Fund has published several reports on the benefits, risks and challenges of CBDCs.
CBDCs are expected to help boost competition, reduce transaction costs, expand access to services and encourage financial participation via mobile devices, according to the IMF. But the IMF says it also can reduce the ability of local governments to conduct monetary policy and control domestic finances.
However, “without appropriate measures, foreign CBDCs could facilitate illicit flows,” the international lender said, adding that this will make it difficult for regulatory authorities to enforce exchange restrictions and capital flow management measures.
Moharramian elaborated on the reasons behind delays in regulating cryptocurrencies.
“The issue is complicated and multidimensional…Many countries are facing ambiguities…central banks are regulating cryptocurrencies at a slow pace.”
“We have to be cautious about this currency, which is basically for decentralizing. We have clear rules on mining cryptocurrencies but trading cryptos is still prohibited.”
Virtual currency mining is legal in Iran and miners are allowed to operate under rules approved by the government in July 2019. However, trade in crypto is banned even though the central bank recently said banks and licensed moneychangers can use the digital currency mined by authorized miners in Iran to pay for imports.
The rising interest of Iranians in mining and trading cryptocurrencies has prompted authorities to craft a roadmap for crypto business. However, the issue of cryptocurrencies, experts say, is more complicated than previous regulatory challenges.