Iran Ready to Launch National Cryptocurrency; Central Bank Proposes Slashing Four Zeroes from Iranian Rial (IRR)

January 28, 2019 / by Zachary Mashiach

According to Al-Jazeera, Iran will be launching its national cryptocurrency before the end of January at the Electronic Banking and Payments Conference in Tehran. This cryptocurrency will be a stablecoin pegged to the Iranian Rial (IRR) and will be completely controlled by the Central Bank of Iran. This Iranian national cryptocurrency will first be used as an interbank token, and then eventually will be deployed for retail use across Iran.

The initial plans for this Iranian national cryptocurrency were revealed after the United States re-imposed tight economic sanctions on Iran, following the breakdown of the Iran nuclear deal.

In November, Iran was banned from the critical international payment system SWIFT. The purpose of this new Iranian cryptocurrency is to circumvent sanctions and replace SWIFT, so that Iran can have a functioning international payments system.

It is likely that the United States will decree that it is illegal to deal with the Iranian national cryptocurrency. In the same way, the United States decreed Venezuela’s Petro to be illegal. It is unknown just how effective this Iranian cryptocurrency will be at re-invigorating Iran’s international payment system.

The launch of the Iranian national cryptocurrency comes at a time of economic despair in Iran, brought about by the United States sanctions. The Iranian Rial (IRR) experienced rapid inflation following the re-imposition of sanctions, with the exchange rate skyrocketing 42,000 IRR per USD to at least 138,000 IRR per USD.

Iran’s government responded by executing currency dealers, and the IRR to USD exchange rate has now gone back to 12,200 IRR per USD on the ‘free’ market, with the official government rate near 42,000 IRR per USD. The true exchange rate is unknown at this time.

Earlier in January, the Central Bank of Iran proposed to slash 4 zeroes from the Iranian Rial (IRR).

“A bill to remove four zeros from the national currency was presented to the government by the central bank yesterday and I hope this matter can be concluded as soon as possible,” Central Bank Governor Abdolnaser Hemmati said.

Drastic redenomination of fiat currency like the Central Bank of Iran is proposing has been seen in other countries experiencing hyperinflation like Venezuela and Zimbabwe, and usually, the result is currency collapse. Slashing zeroes from fiat does nothing to slow the inflation rate.

It remains to be seen if Iran’s national cryptocurrency will effectively facilitate international trade, or if the long arm of United States sanctions will render Iran’s national cryptocurrency ineffective.