The Central Bank of Iran has informed banks and credit institutions about regulations related to the crypto-rial, as a central bank digital currency (CBDC).
The rules, seen by way2pay.ir, contain details about minting and distributing the digital currency. It is stipulated that the CBI will mint the crypto-rial and alone decide the maximum supply of such currency.
According to the website, 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 the transactions and their details are recorded in multiple places at the same time. Unlike traditional databases, distributed ledgers have no central data store or administration functionality.
According to earlier statements, the crypto-rial is planned as a new type of the national currency, like banknotes and coins, though it would be completely digital.
Based on what is known so far about the CBI’s crypto initiative, 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.
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible.
The central bank is given the authority to authorize members of the system and will regularly assess the impact of the new currency on the national economy. The rulebook says nothing about wallets and transaction fees.
The move seeks to help improve financial inclusion and act as a powerful tool for the CBI to compete with other stable coins used globally.
In 2018, the Informatics Services Corporation (ISC), the executive arm of the CBI in charge of the local banking automation and payment services network, was tasked with developing a national cryptocurrency.
Back in January, the CBI said it would launch its CBDC project in the near future. Interest in CBDC has been growing globally in response to changes in payments, finance and technology, as well as the massive global disruptions caused by Covid-19.
So far about 55 countries are working on the proof of concept of CBDCs and nine have fully launched digital currencies. Nigeria is the latest with its e-naira.