Iran's Central Bank Launches Digital Rial Pilot for Micro-Transactions on Kish Island
Summary:
The Central Bank of Iran (CBI) is initiating a public pilot project for its digital currency, the digital rial, for domestic micro-transactions. This digital currency will be accessible to customers and tourists on Kish Island from June 21. The push for a national digital currency is part of a broader effort to develop the country's digital economy and improve micropayments. The digital rial does not require interbank settlement, potentially enhancing efficiency and payment security. However, use of digital rial is restricted within the geographical boundaries of Iran.
The Iranian Central Bank (CBI) is set to initiate its national digital currency through a public pilot scheme, designed particularly for domestic micro-transactions. On June 18, the CBI released an official statement about the initiation of a trial phase for the country's Central Bank Digital Currency (CBDC), the digital rial. This digital token will be accessible to bank customers and tourists on Kish Island as part of the pilot, commencing on June 21, which signals the start of Tir, a month on the Iranian calendar.
Situated in the Persian Gulf, Kish is Iran's second-largest island, spread over an area of 92 square kilometers. With its status as a free trade zone, there is no requirement for tourists from numerous countries to secure a visa for visiting Kish Island, which attracts approximately 12 million tourists annually. In the Middle East, it is the third most frequented holiday spot, after Dubai and Sharm el-Sheikh.
Muhammad Javad Azari, a former Iranian information and communications minister, suggested transforming Kish Island into a hub for both domestic and global cryptocurrency exchanges in 2021.
As per the Central Bank of Iran, the digital rial's public release on Kush Island represents an escalation of the digital rial pilot project that took off in 2023. Through this pilot, bank customers and tourists will be able to use the digital rial to cover purchases by scanning a barcode using specific software. As a new payment option, digital rial can be used alongside physical cash and bank cards.
Unlike traditional electronic money, which requires bank accounts and common payment tools like bank cards, the CBI stated that transferring funds between the purchaser and the seller using the digital rial does not need interbank settlement; instead, the funds are sent immediately upon transfer completion. The CBI also highlighted that this method is simpler than traditional card payments and provides enhanced payment security.
A key objective of the digital rial is to establish a foundation for developing the country's digital economy and addressing any developments in the payment arena. The CBI also underscored the role of digital rial in enhancing micropayments. In addition to these goals, the bank seeks to increase resilience and stability in the national payment architecture, redefine the role of electronic notes for minor payments, enhance efficiency, and develop new payment instruments, while managing risks arising from private money proliferation.
Up until now, the digital rial has been used strictly within Iran, serving as a tool for domestic micropayments. The Iranian government's position on cryptocurrencies is somewhat diverse, allowing the buying and selling of cryptocurrencies, but prohibiting their use as a payment method for goods or services.
Since 2018, Iran has been imposing regulations on the domestic cryptocurrency mining market. Senators from the United States, such as Elizabeth Warren, have raised concerns that Iran's cryptocurrency miners could be a security threat to the U.S., as they may help Iran circumvent U.S. sanctions.
Published At
6/19/2024 1:57:40 PM
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