- The Crypto Rial will be the 7th CBDC to go live
- The Iranian government sees cryptocurrency as a way to access international financial systems
- The Crypto Rial will be fully fungible with the fiat Rial
Iran commenced live testing of their Central Bank Digital Currency (CBDC), the Crypto Rial, which will be a fully blockchain-based digital currency. Testing started on the 22nd of September, according to Tehran Bazaar.
The Crypto Rial was expected to launch in November, but things seem to be happening quite fast. The circumstances leading to the launch of the Crypto Rial and Iran’s entire approach to cryptocurrency are peculiar but not unique. With some African countries in similar or comparable positions, there may be something we can learn from the Crypto Rial CBDC launch.
Crypto Rial, the world’s 7th CBDC to go live
With well over 90 countries, almost half the world, working on CBDCs at different stages, they have started to roll out. The Crypto Rial will only be the 6th CBDC to go live. The first was China’s digital RMB. Since then, we have seen the Central Bank of The Bahamas (Sand Dollar), the Eastern Caribbean Central Bank (DCash), the Central Bank of Nigeria (e-Naira) and the Bank of Jamaica (JamDex).
The most recent launch was the Central African Republic, with their Bitcoin-based Sango as the 6th.
Iran and cryptocurrency
Iran is a country that has many political problems due to political tensions between the Tehran regime and many Western nations.
The imposed sanctions prevent Iran and Iranians from accessing international financial systems for transacting. Now we may look at Iran as a Pariah, but such situations are common in Africa. Zimbabwe currently is under financial restrictions, although not as tight as Iran. These circumstances have informed Iran’s position on cryptocurrency.
Iran is progressive on cryptocurrency
The Iranian government sees cryptocurrency as a way to access international financial systems they have otherwise been locked out of. The Central Bank of Iran established a cryptocurrency access platform for Iran.
They allowed businesses to settle international payments using cryptocurrency. On August 9th, the government of Iran paid US$10 million worth of imports using cryptocurrency.
Later the same month, the Industry and Mines Minister publicly stated that businesses were allowed to complete import trade transactions through cryptocurrency via the central bank cryptocurrency system. Iran does not allow the use of cryptocurrency within its borders.
Is the digital Rial a form of crypto
Iranian authorities have made an intentional play with words when it comes to the name of their CBDC. The digital currency will be blockchain-based, according to the draft document. However, the CBDC will not quite be a cryptocurrency lacking decentralisation and with intentions for the digital currency to be programmable.
The play on the names is somewhat smart and may pave the way for a smooth transition. The Crypto Rial will be fully fungible with the fiat Rial. Iran seems to be on the road to connecting its financial system with the world through digital currency. The CBDC will operate on the Borna platform, which was adopted in 2019 to update Iran’s outdated financial system
Crypto Rial faces criticism
Iran’s reputation internationally is heavily damaged by the strained relations with Western regimes. As such one would expect there to be much criticism of the crypto Rial CBDC and Iran’s wading further into the waters of digital currency. Among the criticisms, the loudest have been the following;
As mentioned before, the use of the crypto Rial has drawn some criticism. While some see the wordplay as mischievous, others see it as being downright deceptive. Using the name to play on the minds of Iranian citizens who would also want access to cryptocurrency as businesses have been permitted to do for import payments.
Cryptocurrency is not allowed within Iran
Iran’s jump to a blockchain-based CBDC while not allowing citizens to use cryptocurrency has also drawn a heat. Critics say it is disingenuous of the Tehran government to only welcome cryptocurrency for some but not for all.
Smart naming but deceptive
The deceptive name of the CBDC, the Crypto Rial, has many questioning the motives. According to the draft document on the Crypto Rial and communication, programmability will be a feature of the Crypto Rial, though not part of the current live test phase.
The programmability feature is a cause for concern to many as it gives the Government and Central Bank of Iran the power to determine the flow and uses of money that are permissible. The concern is that Iranian citizens may have a currency they could use for only approved purposes which may change from time to time.
The CBI could simply program the Crypto Rial barring payments for particular things that are deemed unfavourable or unnecessary in their opinion.
Many have also remarked that Iran’s moves are motivated by desperation caused by being locked out of international financial systems rather than a desire to improve financial access and affordability, as the government stated. This argument is complicated at best, for necessity is the mother of invention.
Low technology adoption
Technology adoption in Iran is low. The chances of the Iranian CBDC, the Crypto Rial, gaining wide adoption hinge heavily on this adoption. The idea may be well-intentioned, but accessibility will determine if it sinks or swims.
While opinions on the Tehran administration and regime in the country are contentious at best, Iran should serve as an example of how to leverage new technology. Some African states find themself in similar circumstances. It is very easy for others to fall on the wrong side of dominant Western powers.
How they got in the hole should not be the focus. Rather, The ball is how they plan to use web 3.0 technology to get out of it. Food for thought.