As US sanctions continue to affect Iran, the Islamic Republic is the reportedly about to launch its own state-backed cryptocurrency and an official announcement is expected at the annual Electronic Banking and Payment Systems conference that starts this week in Tehran.
President Trump’s administration started imposing sanctions in the middle of last year and by November the US had strong-armed Belgian based global financial messaging system SWIFT into severing services to Iran. It was then that the country accelerated its research and development of its own digital currency to facilitate cross-border transactions that are no longer accessible to the country via the traditional SWIFT protocol.
According to Al Jazeera, the new currency is expected to be rolled out in two phases. The first will be a crypto-Rial to be used for payments between domestic banks and internal institutions. Public access will come at a later stage but all signs are that the currency will be an internal one only. By using crypto and blockchain, Iran would be priming itself to join any other blockchain-based payments networks that could end up replacing the SWIFT network, that many in finance say is archaic, slow and expensive.
When Iran signed a blockchain cooperation agreement with Russia and Armenia in November, the head of the Russian Association of Cryptoindustry and Blockchain, Yuri Pripachkin, confirmed that Iran was already working on a SWIFT alternative.
Russian President Vladimir Putin has also made comments confirming the nation’s desire to work with partners on alternative payment platforms and distance itself from the dollar as Trump’s war on trade continues. As Moscow is also sanctioned by the US, a partnership with Tehran is a logical way forward. Rumors that Russia could start stockpiling Bitcoin have also been circulating but with no official confirmation.
Saudi Arabia and the UAE have formed a similar alliance to launch their own banking cryptocurrency to facilitate cross-border payments. The Saudi-Emirati pilot crypto project was announced two weeks ago and is likely to be one of several such blockchain-based finance networks.
Iran so far has been restrictive towards crypto assets and issued a ban on banks handling them last year. A crypto Rial will be no replacement for Bitcoin and it is unlikely to gain any traction on international crypto exchanges but it is a significant step toward financial independence of centralized payments protocols.