Iran has accelerated the development of its state-backed cryptocurrency, the Crypto-Rial, in response to being disconnected from SWIFT’s financial banking system. The sanctions will make it difficult for Iran to settle intentional deals.
According to CEO of Informatics Services Corporation (ISC), Seyyed Abotaleb Najafi, the digital currency will eliminate the role of international financial settlement groups like SWIFT. According to Najafi, the motivation for launching the cryptocurrency goes beyond circumventing US sanctions. The company aims to test the potential of blockchain and crypto technology in running a financial system on both interbank and retail level.
The Crypto-Rial is to be deployed in Iranian commercial banks within the next few days. This will enable the banks to use tokens as a payment instrument in transactions and banking settlement.
According to Najafi, when distributing Crypto-Rials among Iran’s banks, they will block an equivalent value of the conventional rial in their account. This will create a 1:1 peg between the crypto and fiat version of rials. However, the international forex value of Rial will continue to be counted according to the dollar reserves of Iran.
Should Iran hold Bitcoin instead?
Stockbroker Max Kreiser said that blockchainisation of state-backed fiats will eventually lead to the demise of the dollar, and that instead Iran should hold gold and Bitcoin:
Iran needs to get smart and start hoarding Gold and Bitcoin if it wants to avoid the worst of the fallout. 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.
Bitcoin trading is, however, still illegal in Iran.