Iran is expected to unveil its state-backed cryptocurrency this week as it aims to circumvent the sanctions imposed on it by the United States and SWIFT. The cryptocurrency is forecast to be announced at the Electronic Banking and Payment Systems conference in Tehran this week, according to reports by local English-language news outlet Al Jazeera.
Iran turns to crypto following US sanctions
The Islamic Republic of Iran has turned to cryptocurrencies following the sanctions from the United States started in November. The country had previously planned to use blockchain-based financial tools to avoid the restrictions as its economy takes a hit from the sanctions.
According to the report, “The biggest blow to Iran’s economy came in November when some of its banks were barred from SWIFT, the Belgian-based global messaging system that facilitates cross-border payments.”
The central bank-issued digital currency (CBDC) is expected to be backed by the Rial and would become an alternative to SWIFT. Sources close to the matter are not sure if a large-scale implementation will occur. However, the cryptocurrency is expected to be used locally for consumer payments.
Yashar Rashedi, a blockchain developer at Iranian firm Radfa, told Al Jazeera that “They certainly can’t replace the likes of Bitcoin due to their centralized nature, but their existence is harmless. Even as [CBDCs] may never find widespread everyday use among the general public, they may be able to offer some new features to startups and developers that had to work with centralized bank APIs before them.”
The cryptocurrency is expected to be rolled out in phases. It will first come as a rial-backed digital token to support payments between Iranian banks and other Iranian institutions in the crypto space. Later, it will be upgraded to serve as an instrument for the Iranian public to pay for local goods and services.
Even though the cryptocurrency wouldn’t support payments between Iran and other countries, it could serve as a foundation for the country to join a blockchain-based international payments system that could emerge as an alternative to SWIFT.
Iran is not the only country facing sanctions from the US. Russia is facing similar sanctions, and reports have surfaced that country is working on crypto Ruble, a state-backed cryptocurrency. Another state-backed cryptocurrency is Petro, which the Venezuelan government has developed to help avoid US sanctions.
Recently, Iran, Russia, and Armenia agreed to develop a blockchain-based method to replace SWIFT. Yuri Pripachkin, head of the Russian Association of Crypto-Industry and Blockchain stated that “According to our information, active development of an Iranian version of SWIFT is currently underway,”