Islamic Republic's embrace of virtual currency could provide workaround as its economy takes a hit from US sanctions.
The virtual currency is anticipated to be announced at the annual two-day Electronic Banking and Payment Systems conference, which kicks off on January 29 in the capital, Tehran. The theme of this year's gathering is "blockchain revolution".
The blockchain is a fixed distributed ledger technology that allows a network of computers to verify transactions between two parties, as opposed to validating them through a trusted, third-party entity.
The biggest blow to Iran's economy came in November, when some of its banks were barred from SWIFT, the Belgian-based global messaging system that facilitates cross-border payments.
Countries excluded from SWIFT cannot pay for imports or receive payments for exports, leaving them crippled financially, and having to rely on alternative methods of moving money.
Iran's cryptocurrency is expected to be rolled out in phases, first as a rial-backed digital token, to facilitate payments between Iranian banks and other Iranian institutions active in the crypto space, and later possibly as an instrument for the Iranian public to pay for local goods and services.
BLOCKCHAIN-BASED MULTILATERAL FINANCIAL SYSTEM
On the other hand, during the ChainPoint 18 conference in Yerevan, Armenia on November 14, Iran signed a trilateral blockchain cooperation agreement with Russia and Armenia.
Following the finalisation of the agreement, the Russian signatory Yuri Pripachkin, who heads the Russian Association of Cryptoindustry and Blockchain, said, "According to our information, an active development of an Iranian version of SWIFT is currently under way."
Russian President Vladimir Putin later said that Russia is "actively working" with partners to establish financial systems that are fully independent of SWIFT, without naming partner countries.
(...) Member states of the Commonwealth of Independent States (CIS) are other likely parties to a potential blockchain-based multilateral financial system.
Following in the footsteps of regional rivals Saudi Arabia and the United Arab Emirates, who recently launched a joint cryptocurrency, Iran could also use the crypto-rial or a similar sovereign digital currency to skirt sanctions and trade with other partners.
