The Central Bank of Iran (CBI) will start a trial of its digital currency, the digital rial, on Kish Island in July.
Introduction of Digital Rial Wallets
On June 19, the central bank announced that banking network customers and tourists can use the digital rial wallet for purchases and transfers using barcodes, eliminating the need for paper money or bank cards.
No Intermediary
The central bank explained that the CBDC operates independently of bank accounts and does not require interbank settlements. Recipients can use the CBDC directly without intermediaries.
Two private banks, Mellat Bank and Tejarat Bank, will participate alongside banking and payment networks during the trial. Kish Island, with its 140,000 residents and 12 million annual visitors, provides a suitable location due to its free trade zone status.
Benefits and Features
CBI emphasized the digital rial’s programmability as a key feature, describing it as the “driving force” behind new business models in e-commerce and the digital economy. The CBDC aims to enhance the resilience and stability of the payment infrastructure, improve efficiency, and create new payment tools. It also seeks to replicate the role of electronic banknotes for small payments and manage risks from the proliferation of private money. The digital currency is expected to offer ease of use while increasing payment security.
Iran and Digital Currencies
Iran has been developing its CBDC since at least 2021. The country began testing the currency at banks and shops in 2022 and started a limited trial in 2023.
Iran is also considering the use of central bank digital currencies internationally. In May, Izvestia reported that Iran and Russia could use CDBCs to bypass sanctions, based on statements from Rahimi Mohsen, the trade attaché of the Iranian Embassy in Russia.
Despite advancements in CBDC development, Iran remains cautious towards cryptocurrencies. Local financial institutions are prohibited from handling crypto, although the peer-to-peer market continues to flourish, similar to many emerging economies. Additionally, Iran allows import companies to use crypto for business transactions, primarily to evade US sanctions.
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