Iranian Digital currency

FACTA

FUTURA

Iran launches a pilot version of its new digital rial on Kish Island in the Persian Gulf. Users can scan a barcode to make purchases and transfer money without using paper money or bank cards. The central bank began testing a prototype CBDC (central bank digital currency) already in 2022. The digital rial will facilitate retail transactions and will be pegged to the rial.  

Digital rial provides Iran with a tool to curb inflation in the country. Implemented through the Central bank, it will provide the opportunity to limit the money base directly, skipping a few steps of a monetary transmission mechanism. Cash, as well as fiat money, allows savings creation at commercial banks, while CBDC settled directly through the ledger at the central bank might limit savings creation loans and thus withdraw excess liquidity from the market if set properly. Secondly, the ledger centralised at the Central bank and the necessity of internet access to facilitate payments raise concerns about the privacy and consequently financial exclusion of the inhabitants in the country with an authoritarian rule. The creation of a digital currency is currently being considered by all the world's major central banks, including the European Central Bank (the digital euro).