Iran has begun experimenting with a central bank virtual currency (CBDC), launching a pilot allocation in partnership with two banks.
The launch of the Ramzrial (virtual rial) through the Central Bank of Iran places the country as the leader of virtual currency in the region.
Only a few countries have fully introduced a CBDC, adding Bahamas, Jamaica, and Nigeria. About 26 other central banks have carried out pilot projects, according to the Swiss-based Bank for International Settlements, which also says most of the world’s central banks are in less than the region.
For as many countries, the main goal of a CBDC is to make foreign industry more efficient. For Iran, this factor has greater resonance because of the foreign sanctions it faces.
In an effort to circumvent some of the effects of U. S. sanctions, the U. S. In the US, Tehran has sought tactics to lessen its dependence on the US dollar. In early August, it tested the use of a cryptocurrency for foreign industry, with a $10 million transaction. Since then, no similar industry has been reported.
The launch of a CBDC marks a new step in Iran’s experimentation with virtual currencies.
Iranians are no strangers to cryptocurrencies. In fact, the scale of crypto mining activity in the country has put the power grid under great strain and led to widespread blackouts.
Ramzrial’s plans were announced in January, when a central bank official quoted via local news firm Ibena as saying that a CBDC had been approved earlier this month. In June, central bank governor Ali Saleh Abadi said the currency would be introduced in September.
That deadline was met, with Abadi saying in recent days that a limited number of others had donated a billion tomans ($311,000) through two of the country’s largest monetary institutions, Bank Melli and Mellat Bank, and that two department stores had been designated for the use of the currency.
Many facets of this pilot assignment remain unknown. It is not known, for example, how many other people are involved in the trial, who they are, on what basis they earned the money or what they can spend it on.
The Ramzrial is necessarily presented as a virtual edition of an Iranian rial banknote. However, as with any virtual product, its use can be tracked seamlessly through the authorities. As recent widespread protests across the country over Mahsa Amini’s death in police custody have made clear, many citizens are suspicious and green with envy of the Islamic Republic. In this environment, widespread adoption of Ramzrial might not be possible. Many Iranians will likely avoid a tool that may also be just part of a broader formula of state surveillance.
Protesters in the streets of the capital, Tehran, in September 2022, demonstration for MahsaArray. [ ] Amini, a few days after his death in police custody. (Photo: AFP via Getty Images)
Iran is the first Gulf state to verify a CBDC, but it appears to be the first to launch a retail edition that can be used by individuals, unlike wholesale editions that are reserved for use through monetary institutions.
In 2019, the central banks of Saudi Arabia and the United Arab Emirates introduced Project Aber, to verify the viability of a virtual currency not unusual for cross-border trade. They went on to say that the pilot assignment had been a success, nothing more. The follow-up programme had not yet been announced.
The UAE has also been involved in the pilot program in 2021, allocating mBridge with the central banks of China, Hong Kong and Thailand.
Other Gulf countries have been more cautious, all showing varying degrees of interest in the idea.