Can Iranian sovereign crypto-rial loosen sanctions straitjacket?

Al-Monitor | : Iran has for years had to get creative to conduct financial transactions and fight off increasing economic isolation stemming from sanctions. First there were multilateral restrictions imposed by world powers and now unilateral sanctions reimposed by the United States after President Donald Trump abandoned the Joint Comprehensive Plan of Action in May 2018. What Iranian Foreign Minister Mohammad Javad Zarif has called the “art of evading sanctions” is now set to extend to digital currencies.

Iran’s development of a sovereign cryptocurrency is being conducted under the auspices of the Informatics Services Corporation (ISC), an executive arm of the Central Bank of Iran in charge of the country’s payment systems. In a statement released July 25, 2018, the ISC announced that the sovereign digital currency would be pegged to the rial — which had a rocky 2018, losing about 60% of its value against the US dollar — and was ready for trial runs. Also according to the statement, the crypto-rial was to be offered to Iranian commercial banks within three months to be used as tokens and payment instruments to clear interbank transactions.

ISC chief executive Aboutaleb Najafi then explained on Aug. 27 that the rial-backed digital currency had been developed using the Hyperledger Fabric blockchain framework, a project hosted by the US-based Linux Foundation. In his telling, the crypto-rial was developed on a private blockchain and cannot be mined. Commercial banks using it must maintain the network and establish an integrated Know Your Customer (KYC) platform. The digital rial may later be made accessible to businesses and the general public.

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