Iranian officials: Do not recognize cryptocurrency as a means of payment and focus more on digital rial

According to foreign media reports, a senior government official said that Iran will not recognize cryptocurrency as a means of payment. His statement came as the Central Bank of Iran announced rules for issuing digital currencies in the country. However, these are for its own "cryptocurrency", the pilot phase of which should begin in the near future.

Iranian Minister Says Accepting Cryptocurrency Payments Is a Red Line

Reza Bagheri Asl, Iran's Deputy Minister of Communications, while discussing regulatory matters related to cryptocurrency storage and exchange, stressed: We do not recognize payments using cryptocurrencies. Cryptocurrencies like Bitcoin will not be considered legal tender in the Islamic Republic of Iran.

The government official was commenting on the latest resolution of the Digital Economy Working Group on crypto assets. He pointed out that the use of any foreign currency is beyond Iran’s sovereignty and violates Iran’s monetary and banking laws.

“Therefore, we will never have any regulations that recognize payments made in cryptocurrencies that do not belong to us. Iran has its own national cryptocurrency, so payments will not be made in non-national cryptocurrencies,” Bagheri Asl was quoted as saying by Iranian financial news portal Way2pay.

The deputy minister added that in order to prevent Iranian citizens from being exposed to risks, digital asset trading in the country will be subject to a set of rules similar to those applied to the stock market and other currencies. “Cryptocurrencies must be regulated and must be subject to the banking system.”

Plans to launch a digital version of the fiat currency Riyal

Authorities in Tehran have in the past considered allowing Iranian businesses to use decentralized digital currencies to settle with foreign partners as a way to circumvent Western financial sanctions. However, they are currently focusing on launching a digital version of the country’s legal tender, the rial.

In fact, as early as October last year, the Central Bank of Iran was preparing to start the pilot phase of its digital currency project in the near future. Ali Salehabadi, governor of the Central Bank of Iran (CBI), told reporters after the first meeting with lawmakers that the regulator is studying the potential risks and benefits associated with the plan, and the pilot test will begin once the Monetary and Credit Committee approves it.

At the time, the English-language business daily reported that the new phase of the project would likely align with earlier plans for the development of a national cryptocurrency. Officials stressed that the Iranian cryptocurrency would be a digital currency circulated by the CBI, rather than a decentralized cryptocurrency that could be used for small cashless transactions. In addition to the digital currency announcement, Iranian media also learned that the central bank's new management and members of parliament agreed to form a joint committee tasked with reforming legislation regarding the CBI. Its members are expected to quickly finalize a long-awaited plan to update the law governing the activities of the central bank.

In January, the governor of the Central Bank of Iran announced the approval of the Monetary and Credit Committee’s plan to launch a pilot phase of the national cryptocurrency. Mehran Moharamian, deputy governor of CBI IT affairs, said that the bank sees cryptocurrency as a solution to inconsistencies and decentralized resources, which many countries have recently begun to benefit from.

In addition, in January this year, the head of Iran's Trade Promotion Organization also stated that the Central Bank of Iran and the Ministry of Industry, Mining and Trade have reached an agreement to connect the CBI encryption platform with the integrated trade system, allowing companies to use cryptocurrencies to settle payments to foreign partners. The mechanism for the operation of the system is currently being finalized, and no further details are available.

Iran's Central Bank shares details on digital rial project

The Central Bank of Iran (CBI) recently informed banks and other credit institutions of regulations related to "cryptocurrency", which have been under development for some time. They apply to the minting and distribution of central bank digital currencies (CBDCs). The CBI will be its sole issuer and will determine the maximum supply.

According to Way2pay, the digital currency is based on a distributed ledger system, maintained by authorized financial institutions and capable of executing smart contracts. It also announced the infrastructure and guidelines for CBDC, and will conduct a pilot in the near future.

The report states that the digital rial will be issued in accordance with the legal provisions governing banknotes and coins. The CBI will monitor the economic impact of the digital currency and manage its impact in accordance with the authorities’ monetary policy. Users will only be able to transact with the CBDC within Iran.