The banking conference focused on creating guarantees with cryptocurrency, operationalizing the digital rial, and conducting various sandbox courses as part of our efforts to develop frameworks in the fourth layer, or the execution layer, of the fintech sector.
The 10th Annual Conference on Electronic Banking and Payment Systems was held this November with the theme of “Transition to Smart Banking.” The notable aspect of this conference was allocating specialized panels to artificial intelligence and DeFi (Decentralized Finance).
According to Peyman Ghorbani, secretary of the 10th Electronic Banking and Payment Systems Conference, the Monetary and Banking Research Institute dedicated this year’s conference to the theme of “Transition to Smart Banking” to facilitate dialogue and leverage the viewpoints of scholars, researchers, and experts in the banking system.
Development of the “PolPay” Wallet
At the conference, Mehran Mahramian, Deputy for New Technologies at the Central Bank, discussed the growth of financial technologies in various countries, stating: “Almost all countries in the world are on a path of growth in financial technologies. One of the areas we have also focused on in Iran is the regulation and technologies related to central banking. The role of regulators is very complex because they cannot focus on just one aspect and must consider a wide range of stakeholders.” He continued, “The Central Bank has also undertaken initiatives in artificial intelligence in banking processes, but we are now focusing on credit scoring since we have not kept pace with the world in this regard.” Mahramian also emphasized the need for open banking, fintech, and the reform of the fee system, stating that the Central Bank is currently developing the “PolPay” wallet.
Using Cryptocurrencies for Exports and Imports
Mohammadreza Farzin, Governor of the Central Bank, spoke about the Central Bank’s policy on cryptocurrencies, saying: “Our policy is for cryptocurrencies to help with exports and imports without leading to money laundering. A team has been formed at the Central Bank to assist us in revising these policies, and our overall policy is stability and calm for the market.” Farzin added, “Now, with the help of technology and artificial intelligence, more accurate data can influence decision-making and governance, and this knowledge must grow further in the banking industry. According to statistics, we have used AI in seven percent of the banking industry, aiming to increase it to 15 percent. As stated by the Supreme Leader, we must be among the top 10 countries in employing artificial intelligence.”
The Central Bank as an Inhibitor and Suppressor
The Electronic Banking and Payment Systems Conference also held several specialized panels. At the “Innovation in the Payment System” panel, Mohsen Karimi, Deputy for International Affairs at the Central Bank, stated: “The Central Bank, in its effort to maintain the existing order, is often an inhibitor and suppressor, which is why the first factor in creating innovation in the payment system is the Central Bank itself.” He added, “The role of the Central Bank in payment system innovation is crucial. The Bank sometimes acts as an inhibitor and resists changes because it is concerned about disrupting the existing order.” Karimi explained the relationship between regulation and technology: “As the Central Bank, we must recognize that technology enables fast regulation. Otherwise, it will lead to suppression.
Additionally, Mohammadreza Mani-Yekta, Director of Supervision of Payment Systems at the Central Bank, highlighted the complexity of payment systems, saying: “In the future of the payment industry, we will see blockchain, the maturation of decentralized finance, the widespread adoption of peer-to-peer platforms, the elimination of payment intermediaries, improved payment speed, advanced fraud detection systems, enhanced security, and the dynamism of the payment industry.”
Regulation Should Not Replace Restriction
Reza Bagheri Asl, Deputy Minister of Communications and Information Technology, criticized regulatory practices during the specialized panel on “Regulation and Intelligent Supervision.” He said: “Given the diversity of actors in the ecosystem and the interweaving of their activities, the regulator’s role has become more complex, and their responsibilities have diversified as well. Unfortunately, we don’t know what exactly we need to regulate in regulation.” He further explained: “While it’s true that we must protect customer data, I emphasize that we should not replace observation and regulation with restriction.”
Prohibition and Restriction Should Be the Last Resort
Hossein Eslami, President of the Tehran Province ICT Guild Organization, also spoke at this session: “As we are transitioning from electronic banking to smart banking, we also need to regulate intelligently. Technology and supervision are intertwined, and we should see this reflected in the Central Bank’s structure. We must recognize new technological players and make regulation more interactive.” Eslami emphasized that “prohibition and restriction should be the last resort,” adding, “We do not view the regulator as the cyber police. If restriction dominates the regulator’s perspective, it will hinder business growth.” He continued: “What we ask from the regulator is to express business concerns so businesses can solve challenges with their solutions.” In response to these remarks, Mehran Mahramian stated: “The purpose of regulation is clear, and it’s not possible to satisfy all stakeholders in the process of regulation. However, we have adopted a developmental approach along the way. The situation is improving, and everything can be solved with data-centric approaches. Smart regulation is possible in this context. Suppose a platform facilitates money creation or eliminates the trace of money. In that case, we won’t overlook it because the interests of 80 million of our compatriots are at stake, and we must protect the public interest.”
The Use of Blockchain in Fourth-Generation Banking
At the “Security in Smart Banking” panel, Hossein Gharaei, CEO of Kashef Company, discussed security, artificial intelligence, and the challenges facing smart banking. Describing the evolution of banking over time, he outlined the four generations of banking. While discussing fourth-generation banking, he stated: “The use of artificial intelligence, machine learning, blockchain, and big data analysis, as well as personalized data-driven services, are characteristics of this generation of banking.” Gharaei explained that security scenarios are a combination of different technologies and said: “Smart banking is a scenario derived from the combination of various technologies, which over time are utilized in combination.” He listed six key areas for fourth-generation banking: “Multichannel banking, modular banking, open banking, smart banking, social network-based banking, and blockchain-based banking are the pillars of fourth-generation banking.”
Central Bank’s Fintech Roadmap: Providing Frameworks Instead of Licenses
On the conference’s second day, Mehran Mahramian presented the Central Bank’s roadmap framework and its various layers and actions. He described the first layer, referred to as the structural layer, saying: “This layer includes the creation of a fintech oversight body within the Central Bank, a data governance task force, an open data task force, the establishment of a monitoring and tracking system for crypto assets, and a task force for modern payment methods, all of which will be completed by mid-2026.” He identified the second layer as regulatory, stating: “We are working on a framework for LendTech, the development of open banking, regtech, and suptech, activities related to cryptocurrency exchanges, using cryptocurrencies for imports, drafting regulations for IoT payments, defining the operational framework for neobanks, updating the identification document, regulating e-wallets, revising regulations in the payment system, reviewing modern payment method regulations, drafting guidelines for the PolPay system, and regulating card-to-card payments as part of our second-layer roadmap efforts.” Regarding the third layer, which deals with licenses, Mahramian stated: “We aim to avoid issuing licenses as much as possible and instead provide frameworks. At the same time, business credit scoring, decisions regarding crowdfunding, financing for lendtechs, and resolving issues related to cryptocurrency exchanges will be handled in this licensing layer.” He added: “The new credit scoring model, open banking, the account-based payment system (PolPay), creating guarantees with cryptocurrency, operationalizing the digital rial, and running various sandbox initiatives are part of our efforts to develop frameworks in the fourth layer, or the execution layer of the fintech domain, which follows the implementation of the first three layers.”
Cryptocurrency Exchange Is a Challenging Field
Mohammadreza Mani-Yekta spoke at the “Fintech and Smart Banking” session about the Central Bank’s critics who view innovation as misconduct. He remarked: “The country’s economic situation is unique, and regulation must be aligned with the domestic economic environment.” Concerning the Central Bank’s interaction with cryptocurrency sector players, he said: “Cryptocurrency exchange is a challenging area, and we must accept that the regulator’s approach to payment systems differs from that in lendtech or cryptocurrency. The Central Bank has supported businesses in the payment sector even when they’ve crossed red lines.” Mani-Yekta acknowledged that a mature interactive environment has not yet been established and added: “Innovation is often seen as sidestepping regulations and not aligning with the regulator’s objectives. However, since 2018, our internal conditions have been unique, and as regulators, our focus is on the domestic environment. Globally, regulators are allowed to take risks, but in Iran, the pressure on regulators is constant to make zero-risk decisions. Otherwise, they are blamed.”
We Are Living in a Digital Hole
Sadegh Faramarzi, Vice President of the Tehran ICT Guild Organization, discussed the challenges in the relationship between businesses and the Central Bank, stating: “I disagree with the idea that fintechs don’t have a proper understanding of the regulator. What should fintechs do when the regulator moves at a turtle’s pace? In these continuously sensitive conditions, what are businesses supposed to do? We are living in a digital hole, and in this hole, unfortunately, the regulator and businesses are moving back-to-back.” He added: “Some fintechs are negligent in implementing the law, but there is a mutual understanding between the regulator and businesses.”
DeFi Is Not Here to Eliminate Intermediaries
One of the sessions on the second day of the Banking Conference was dedicated to DeFi. Reza Ghorbani, a Tehran ICT Guild Organization board member, spoke at the “DeFi and Banking Ecosystem” session, saying: “DeFi is one of the most significant technologies we will witness in financial processes. The five key problems of centralized systems are central control, limited access, inefficiency, ineffectiveness, and lack of transparency. When we move toward DeFi, we must ask which problem we aim to solve.” He emphasized: “Centralized money has a history of 120 years in the world. Centralized systems are a major achievement of humanity, and we do not want to eliminate them but rather enhance them. Banking systems, which have grown on the foundation of centralized money, have realized how they can play a role in this new space, and the answer lies in DeFi—projects that are meant to help centralized systems evolve. DeFi is a response to the issues created by centralized systems, and it hasn’t come to eliminate intermediaries but to replace them with code and applications.”
DeFi and Banks Are Contradictory
Abbas Ashtiani, CEO of the Blockchain Association of Iran, spoke about DeFi’s solutions for limited access, stating: “DeFi and the banking system are somewhat contradictory. Banks, as centralized entities, offer certain financial services, whereas decentralized systems provide the same services without needing a central entity. One of the concepts is the smart loan. There is a liquidity pool and lenders and borrowers, with no need for an intermediary like a bank.” He added: “Our centralized systems should learn from this and pay attention to the market. The first lesson of DeFi is that the economy cannot be commanded, and the second is that transparency exists in all areas, such as financing and lending. These are lessons that CeFi (centralized finance) can learn to achieve maximum transparency in decision-making processes. Another model is that banks should forget about scrutinizing fintechs and instead follow them. Decentralizing the components of centralized entities is another lesson DeFi can teach us. In the past, we had 12 payment companies (PSPs), but with the creation of payment facilitators, over 100 are now active, creating more than 100 innovations for businesses.” Ashtiani pointed out that we are talking about a new asset class: “While part of the world’s investments have shifted toward crypto, on January 10, 2018, the Central Bank prohibited banks and financial institutions from entering this field. The Central Bank is indeed concerned about money laundering, but globally, the use of cryptocurrency for crimes at any level hasn’t even reached five percent of fiat currencies. For a smart criminal, cryptocurrency, with its transparency, is the last option.”
Digital Rial Will Be Developed by the End of the Year
Hossein Yaghoubi, head of the Blockchain Unit at Informatics Services Corporation, explained the concept of decentralized financial services: “DeFi can be defined as banking without banks. A user needs banking services, not the bank itself. If a fintech can provide these services, the user will no longer need a bank. The blockchain revolution in the financial sector changes the trust-building layer, and there’s no longer a need for a centralized entity.” Regarding Central Bank Digital Currency (CBDC), he said: “The Digital Rial supports P2P transactions and smart contracts, and banks can program it. Since last year, when the technical development of the Digital Rial was completed, we have entered the experimental phase. Based on the Borna blockchain platform, the Digital Rial is transferred to banks’ treasury wallets and made available to end-users. It’s important to note that the Digital Rial is not a stablecoin but fiat, meaning the Central Bank converts part of the cash it intended to print into Digital Rial, the country’s official currency.”
Central Bank’s Stance on Digital Currency Was Silence
Mohammad Shirijian, Deputy Economic Director of the Central Bank, spoke at the “Central Bank Digital Currency” session, assessing the banking system’s approach to innovation. He said: “The traditional view toward digital currency has prevented us from progressing. Digital transformation is more about changing institutions and processes than technology. Digital transformation hasn’t permeated our banking system because we don’t have a transformative outlook on businesses.” Regarding the Digital Rial and the Central Bank’s view, he said: “Despite technical advancements, we haven’t made significant progress with the Digital Rial. There was a time when cryptocurrency had over 250 trillion tomans in financial circulation, and the Central Bank hadn’t clarified its stance because its view on this sector was closed. From an anti-money laundering perspective, it couldn’t monitor it. We must accept that the government and the Central Bank have taken a stance of silence and neglect this issue because there hasn’t been a unified position among decision-makers.”
Amirabbas Emami, an expert in electronic banking, discussed the state of the Digital Rial and the Central Bank’s approach to blockchain, saying: “A serious financial transformation has occurred, especially after the stablecoin discussions. The Digital Rial was a response to participation in this space. The Central Bank’s actions regarding cryptocurrency aren’t intended to eliminate fiat money, but we are dealing with programmable money.” He continued: “We hoped that the Digital Rial would foster innovation. The Digital Rial should adopt a developmental approach and connect with other blockchains. If this doesn’t happen, the Digital Rial will remain minimal.”
Transition to Smart Banking
Peyman Ghorbani, Secretary of the 10th Electronic Banking and Payment Systems Conference, concluded the event with a statement, saying: “In customer experience, credit scoring, and payment security, global experiences in transforming credit scoring models, along with the performance of the current credit scoring system in the country, indicate the need to transition from traditional models toward AI-based models. Using intelligent credit scoring models plays a key role in managing credit risk in the banking network.” Regarding the decentralized finance (DeFi) ecosystem and cryptocurrencies, he said: “Given the benefits of DeFi ecosystems in reducing costs, improving transparency and security, and most importantly, financial inclusion, the ability to interact with decentralized financial infrastructures (DeFi) will be an undeniable necessity in the future of banking services.” Finally, according to the head of the Monetary and Banking Research Institute, as the shift from electronic banking to the fourth generation of banking occurred over the ten years of this conference, the event’s title will change next year to “Modern Banking and Payment Systems.”
