The Central Bank of Iran (CBI) will begin a trial of its central bank digital currency (CBDC), the digital rial, in Kish Island starting in July.
The central bank said on June 19 that banking network customers and tourists can use the digital rial wallet to make purchases and transfers between wallets via barcode without paper money or bank cards.
No intermediary
The central bank emphasized that CBDC is not used through bank accounts and does not require interbank settlement. Upon receiving it, recipients can transact directly via the CBDC without an intermediary.
Two private banks, Mellat Bank and Tejarat Bank, will participate alongside banking and payment networks during the trial phase.
The test’s location, Kish Island, has 140,000 residents and 12 million annual visitors and is a free trade zone, providing opportunities to trial the asset.
CBI also described the digital rial’s programmability, calling the feature the “driving force” behind new business models such as e-commerce and the digital economy.
The central bank said that the CBDC is intended to improve payment infrastructure resilience and stability, improve efficiency and create new payment tools, reproduce the role of electronic banknotes for small payments, and manage risks caused by the spread of private money.
The bank added that the digital currency will offer ease of use while increasing payment security.
Iran and digital currencies
Iran’s CBDC has been in progress since at least 2021. The country reportedly began to test the currency at banks and shops in 2022 and started a limited trial in 2023.
Iran could also use central bank digital currencies outside of its borders. In May, Izvestia reported that Iran and Russia could use CDBCs to bypass sanctions, based on statements from trade attaché of the Iranian Embassy in Russia Rahimi Mohsen.
Despite its advanced development of a CBDC, the country remains somewhat anti-crypto. Local financial institutions are barred from handling crypto, but the peer-to-peer market continues to thrive, as is the case with many emerging and developing economies.
Additionally, Iran allows import companies to transact via crypto for business purposes — mainly to bypass US sanctions.
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