The Islamic Republic of Iran has been under quite some economic stress after being barred from the Belgian global messaging system which facilitates cross-border payments called SWIFT, followed by US sanctions. The country is planning to unveil a state-backed cryptocurrency to get around such an obstacle, says a report published by the international news outlet Al-Jazeera. The report suggests that the digital asset would be announced during Electronic Banking and Payment Systems conference to be held in the capital, Tehran.
Society for Worldwide Interbank Financial Communications (SWIFT) is a member-owned cooperative that connects more than 11,000 banks, financial institutions and corporations in more than 200 countries and territories around the world. SWIFT had banned Iran “in the interest of the stability and integrity of the wider global financial system” shortly after the US had reimposed oil and financial sanctions on the country last November. If a nation is cut off from SWIFT, they cannot pay for imports or receive payments for exports, and end up being crippled financially.
As per the reports, the cryptocurrency is expected to be unveiled in phases. Initially, as a Rial backed currency to facilitate payments between Iranian banks and other Iranian institutions active in the crypto space. Later, as an instrument for the Iranian public to pay for local goods and services. A blockchain-based international payments system is expected to be adopted as an alternative to SWIFT, and the cryptocurrency would help Iran to join such a system.
Iran is one of the many countries which is opting to release centralized digital currencies with the aim to counter US sanctions. Russia and Venezuela had also announced their decision of launching their cryptocurrency to bypass US-led trade sanctions. Iran had announced their decision to launch a cryptocurrency last year after the US started reimposing sanctions on them. Following that, the US inscribed more sanctions on Iran’s upcoming sovereign cryptocurrency. This will ensure that the forthcoming cryptocurrency would lack credibility in international exchanges.
“Even as CBCCs [Central Bank Cyrptocurrency] 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” noted Yashar Rashedi, a blockchain and crypto developer based in Iran.
State-backed cryptocurrency would allow Iran to avert the sanctions and trade with partners. The government’s decision to adopt blockchain could create help the sector gain more acceptance and encourage research. The framework for the crypto ecosystem will be announced by the end of the current Iranian year in late March.