Iran’s Central Bank (CBI) will launch a central bank digital currency (CBDC) pilot project on September 22 according to the media service of the national Chamber of Commerce, Industries, Mines and Agriculture, Bankless Times learned.
Thus, Iran enters the list of countries adopting government-issued stablecoins. The news service reported that the purpose of the so-called “crypto rial” was to turn banknotes into programmable entities, according to the CBI.
Doubts about practicality
In May last year, ex-CBI Governor Abdolnaser Hemmati said his institution had already developed a basic version of the digital rial. Its current Governor, Ali Salehabadi, said the bank had the rules and infrastructure needed for a CBDC earlier this month.
The CBI plans to introduce it in November, but experts remain very reserved about the practicality of the initiative and its potential economic impact.
Little is known about its function
The CBI has shared little information about the actual purpose the digital rial will serve or its work on it. The Iranian government sees crypto as a way of evading strict US sanctions. Earlier in 2022, the sanctioned country made a $10 million import order to be paid in crypto.
The government news service assured the digital currency would not compete with major cryptocurrencies like Bitcoin and Ethereum. The initiative seeks to facilitate financial inclusion and operate as a powerful tool so the Central Bank can compete with other stablecoins worldwide.
Businesses aren’t ready
Government officials claim the digital rial will be used for domestic micropayments, but experts don’t believe businesses in the country are ready to accept the new national currency. What’s more, Iranian users need to become more familiar with digital wallets, and especially security issues.
On a macroeconomic level, experts worry about the digital rial’s potential negative impact on banks.Former CBI Deputy Governor Ahmad Azizi said, quoted by Tejarat News.
Azizi said, “Basically, banking is a business of financial intermediation. Implementing large projects would weaken banks’ role in financial intermediation.
“It would also impact their assets and lending power and ultimately multiply theirlosses. It seems that the CBI has not clarified the project to experts simply because no banker has made any statement to this effect so far.”