The Central Bank of Iran (CBI) is launching the national digital currency in a public pilot targeting domestic micropayments.

The CBI officially announced on June 18 the launch of a pilot scheme for Iran’s central bank digital currency (CBDC), the digital rial.

As part of the pilot, the Iranian digital currency will be available to banking customers and tourists on the island of Kish. The pilot will start on June 21, the first day of the calendar month of Tir.

Kish Island operates a free zone

An island of 92 square kilometers, Kish is the second largest island in the Persian Gulf, located south of Iran. Kish Island is a popular tourist destination, reportedly hosting around 12 million visitors each year. As Kish operates one of Iran’s free trade zones, tourists from many countries are exempted from obtaining a visa to visit Kish.

In 2021, Muhammad Javad Azari, a former minister of information and communications in Iran, proposed transforming Iran’s Kish Island in the Persian Gulf into a hub for domestic and international cryptocurrency exchanges.

Iran’s digital rial doesn’t require interbank settlement

According to Iran’s central bank, the public rollout of the digital rial on Kush Island will be an expansion of the digital rial pilot program that started in 2023.

As part of the pilot, bank customers and tourists will be able to use the digital rial to pay for goods and services through scanning a barcode through special software. The digital rial introduces an additional payment method in addition to cash or bank cards.

“Unlike other types of electronic money commonly used in the country, which are used through bank accounts and common payment tools such as bank cards, the digital rial does not require interbank settlement to transfer funds between the buyer and the seller,” the CBI noted in the statement, adding that the funds are sent as soon as the transfer is completed.

“Payment with this method is much easier than common card payment methods while increasing payment security,” the CBI added.

Iran lays the foundation for effective micropayment tools

One of the core missions of the digital rial is laying down the groundwork for the development of the digital economy in the country and responding to the development needs of the payment field, Iran’s central bank wrote. The CBI also pointed out the role of the digital rial in improving micropayments, stating:

“Other important goals such as increasing resilience and stability in the country's payment infrastructure, recreating the role of electronic banknotes in small payments in the country, improving the efficiency and developing new payment tools, and managing the risks caused by the spread of private money are also considered [...]”

The CBI emphasized that the digital rial has been so far used exclusively for the purpose of use within the country's geographical boundaries and to facilitate domestic micropayments.

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The government of Iran has taken a mixed stance on cryptocurrencies like Bitcoin (BTC). While allowing crypto purchases and sales, the Iranian government has banned one from using crypto as a means of payment for goods and services.

Iran has been also regulating the local cryptocurrency mining market since 2018. According to United States Senators like Elizabeth Warren, Iran’s cryptocurrency miners pose a national security threat to the U.S. as they might allow Iran to bypass U.S. sanctions.

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