Global provider of secure financial messaging services, SWIFT, has ousted the Central Bank of Iran (CBI) from its financial banking system. The US-led sanctions will make it difficult for Iran to settle its international deals. In response, the authorities in Iran have accelerated the development of their state-backed national digital currency.

Central Bank of Iran’s State Backed Cryptocurrency

According to a local media source, Informatics Services Corporation (ISC), a private tech wing of the CBI, confirmed that they had developed the said crypto-rial. The company’s CEO Seyyed Abotaleb Najafi claimed that their digital currency would eliminate the role of international financial settlement groups like SWIFT. It will be used in a distributed or one-to-one framework for transferring value without intermediaries.

Najafi believed that the reason to launch a Crypto-Rial goes way beyond the aim of circumventing US sanctions. The official said that their pilot program is aimed at testing the potential of blockchain and crypto technology in running a financial system on both interbank and retail level.

The state now plans to deploy the crypto rial on Iranian commercial banks in coming days which would enable them to use the tokens as a payment instrument in transactions and banking settlement, he added. The underlying value of digital rial comes from its fiat supply, Najafi revealed.

The ISC official said that while distributing the crypto version of rials among Iran’s commercial banks, they would block an equivalent value of the conventional rial in the CBI account. It would create a 1:1 peg between the crypto and fiat version.

However, the international forex value of Rial, by default, will continued to be counted according to the dollar reserves of Iran. A real independent change would likely come only if countries across the world would agree to settle international deals with Iran in crypto-rial.

Keiser: Iran Should Hold Bitcoin

Stockbroker Max Keiser told RT that blockchainization of state-backed fiats would eventually lead to the demise of the dollar;

“The US puzzlingly seems to want to expedite global de-dollarization with its ill-advised weaponization of SWIFT,”

He referred to growing dissent against the greenback among world’s richest economies like Russia and China. Both the countries are developing an alternative to SWIFT in addition to buying hundreds and tonnes of gold as reserves against the dollar. While an alternative settlement protocol could open an easier import and export channel between countries affected by the US sanctions, gold reserves should provide economies with a key support to their falling national currencies.

According to Keiser, Iran is facing a short-term drastic problem and suggest the country should do a Russia or China – by increasing their gold reserves – and even that of Bitcoin, a digital currency untouched by the macroeconomic financial factors.

“Iran needs to get smart and start hoarding Gold and Bitcoin if it wants to avoid the worst of the fallout,” Keiser told RT. “It is already, smartly, pursuing bilateral energy deals outside of the $USD, but it needs to add value to its currency with reserves of Gold and Bitcoin.”

However, trading of Bitcoin and similar crypto assets is still banned in Iran.

Image from Shutterstock