According to Mojtaba Tavangar, implementing the central bank’s cryptocurrency project requires in-depth analysis, and the Economic Commission of the Parliament has yet to reach a consensus on the crypto issue.
The Pros and Cons of Iran’s Central Bank Digital Currency
The discussion about the “central bank digital currency” (CBDC) in Iran was first raised by the Post Bank and the Ministry of Communications in 2017, which announced its pursuit of “digital currency” and invited experts to collaborate with this government entity. However, at that time, there was no consensus on the nature of this digital currency—whether it was intended to be a blockchain-based project like Bitcoin or merely a digital form of the national currency. This issue was subsequently followed up in 2018 by Meharn Mahramian, the Deputy for Technology at the Central Bank, who sought to utilize modern technologies in this institution. Previously, central bank cryptocurrency projects were conducted at the study level in some countries and pivoted in others. Nevertheless, establishing a central bank cryptocurrency has progressed slowly over the years, to the extent that the second draft of the digital rial document was published in December 2022. The Central Bank later pursued this project, although it still faced opposition among members of the Islamic Consultative Assembly.
Ali Salehabadi, the former Governor of the Central Bank, stated in early July of the previous year that the crypto rial would experimentally replace banknotes starting September 2022. However, at that time, members of Parliament expressed their opposition to this issue. For instance, Mohammad Hassan Asafari, a member of the Islamic Consultative Assembly, wrote on Twitter: “The decision to fundamentally change the type of money and transform it into a digital and intelligent form called crypto rial not only contradicts the principles of the Constitution and the Islamic Sharia but also exceeds the authority of the Supreme Money and Credit Council. Considering the evidence regarding the potential national security risks, no argument for executing this illegal act is acceptable.” This promise has not been realized. Throughout this period, attempts to launch a digital rial, at least on an experimental basis, have not yielded results. There have been occasional statements about pursuing this matter at the Central Bank, but it has not progressed.
Principle 90 Commission Calls for Halting the Digital Rial Project
On June 29, 2023, the Principle 90 Commission requested the Central Bank stop implementing the digital rial project. Ali Khazarian, the spokesperson for the Principle 90 Commission of the Parliament, mentioned the commission’s meeting regarding the digital rial project in an interview with the House of Representatives news agency, stating: “According to the monetary and banking law, the Central Bank is not permitted to use non-physical financial instruments and can only issue physical forms of coins and banknotes considering economic interests and necessary backing.” He added that regarding the digital rial project, Parliament must express its opinion through a bill or proposal. Regardless of whether entering the subject of the digital rial is an economic necessity for the country given existing threats, he noted: “In the current monetary and banking law, there is no authorization granted to the Central Bank for entering the digital rial issue or issuing non-physical money in any form. Therefore, the Principle 90 Commission emphasized that the Central Bank must halt the current process of entering the digital rial arena and provide legal documentation in this regard.”
On June 29, 2023, the Principle 90 Commission called the Central Bank to stop implementing the digital rial project. In response, the Parliament’s Knowledge-Based and Digital Economy Committee stated in a letter that the issuance of the Central Bank’s digital rial has been conducted considering relevant considerations.
These statements did not go unanswered. On July 2, Mojtaba Tavangar, the head of the Knowledge-Based and Digital Economy Committee of the Economic Commission of the Parliament, sent a letter to Mohammadreza Pourebrahimi, the head of the Economic Commission, detailing the committee’s report on the legal status of the digital rial. This report was prepared in three sections: “Legal Considerations for Implementing the Digital Rial,” “Advantages and Disadvantages of Digital Currency,” and “Resolutions and Actions Required for Implementing the Rial Governance Plan.”
The letter stated: “The issuance of the Central Bank’s digital rial has been conducted with consideration of relevant considerations, among which is that according to paragraph (a) of Article (10) of the monetary and banking law, ‘The Central Bank is responsible for regulating and implementing monetary and credit policy based on the overall economic policy of the country.’ Furthermore, considering paragraph (b) of this article, ‘The goal of the Central Bank of Iran is to maintain the value of money, balance payments, facilitate commercial transactions, and contribute to the country’s economic growth.'”
Advantages and Disadvantages of Digital Currency in Tavangar’s Letter
In this letter, Tavangar also pointed out the advantages of digital currency: “In the ecosystem of the digital economy, there are significant advantages and disadvantages associated with digital currency. Therefore, if our Central Bank is determined to implement the digital rial, paying attention to these advantages and disadvantages is essential. The advantages of this initiative include the potential for faster and cheaper domestic and international payments; the potential to offer accounts to small depositors as a safer place for deposits; the ability to improve the resilience of the payment system against cyber attacks, operational failures, and hardware errors compared to centralized data storage and processing, which have lower frequencies; the possibility of providing alternatives to private sector digital technologies, addressing operational risks, or controlling monopolies arising from these providers; the potential to incentivize participation in the banking sector for both banking and non-banking individuals; the potential to improve the performance of anti-money laundering systems and reduce tax evasion, corruption, and illegal activities; the possibility of reducing costs associated with cash storage, transportation, and management within the banking system; and the sufficient potential to challenge the monopolistic power of commercial banks, thereby putting pressure on them regarding small deposits to increase interest rates for depositors and offer more financial services.”
Of course, the letter also addressed the disadvantages of the digital rial project, which include significant risks to financial stability arising from the separation of banks and the resulting pressures; notable risks concerning consumer privacy compared to cash; increased cybersecurity risks and a higher likelihood of exposure and vulnerability compared to cash; challenges associated with blockchain technology, such as transaction scalability, user experience, key management, confidentiality, and operational speed; and the possibility of easy and cheap access for the government to the people’s assets.
In conclusion, he emphasized: “Some central banks worldwide, due to insufficient knowledge, believe cryptocurrencies diminish their authority and therefore have serious opposition. For this reason, using digital rial tools in our country should not cause the Central Bank to hinder the growth and regulation of cryptocurrencies more than before.”
The use of the digital rial in our country should not result in the central bank hindering the growth and regulation of cryptocurrencies more than before.
Study of New Blockchain Technologies in the Islamic Consultative Assembly
In the context of the digital rial, we spoke with Mojtaba Tavangar, the head of the Knowledge-Based and Digital Economy Committee of the Islamic Consultative Assembly, whose detailed comments follow.
Tavaghar explained the views of the members of the Islamic Consultative Assembly regarding new blockchain technologies: “Blockchain technology is a vast field, with a small part of it—such as cryptocurrencies—gaining traction in our country. Therefore, it is only natural that there is no final and comprehensive consensus among policymakers in the country regarding this technology. The situation is similar in other parts of the world, where governments monitor and regulate technology accordingly. The fact that new decisions are being made daily in the realm of blockchain, fintech, cryptocurrencies, and new technologies is due to decision-makers still trying to understand it to minimize harm to the public. Therefore, we must approach these phenomena carefully, flexibly, and finesse. Like all legislative decision-makers worldwide, members of the Assembly in Iran are studying the dimensions of this important phenomenon.”
Blockchain technology is a vast field, of which a small part—such as cryptocurrencies—has gained popularity in our country.
He remarked that the digital rial has been raised for some time but that proponents and opponents have yet to reach a consensus, and there are ambiguities regarding its economic or security challenges. He stated, “The launch of CBDCs (Central Bank Digital Currencies) is a hot topic that more than 130 countries are examining or implementing, and it is not limited to Iran. From what I understand, the opposition to the digital rial project is mainly economic rather than security-related; this opposition focuses on its effectiveness and implications for the country’s monetary policies. Some colleagues emphasize the need for legislation in this area, which is not insurmountable. Of course, the Central Bank must also ensure that the digital rial project does not result in more unreasonable cryptocurrency restrictions.”
Regarding the Economic Commission’s view on the necessity of entering new technologies and the digital rial project, he stated, “We have not yet reached a coherent discussion and conclusion in the Economic Commission regarding the digital rial. This topic is still being pursued in the Digital Economy Committee of the Assembly. However, we have agreed that the honorable government should provide the necessary bills for review and approval by the Assembly. Then, the Commission and the Assembly will conduct the necessary reviews and amendments. Recently, I published a report from the Digital Economy Committee regarding the pros and cons and the legality of the digital rial, where various aspects of this important issue are elaborated upon.”
He noted that there are diverse viewpoints from the International Monetary Fund regarding the central bank cryptocurrencies of various countries. Still, this project has not been implemented in some countries or is undergoing studies. In response to why there is still resistance regarding the study or trial phase of the digital rial, he explained: “In general, implementing a central bank cryptocurrency project is not easy and requires thorough investigation. For instance, in China, where cryptocurrency exchanges are fundamentally prohibited, the electronic yuan project has been under review for several years, and they have only recently allowed its experimental use for purchasing certain items, such as plane and train tickets. There is still a long way to go before widespread adoption can occur. In Iran, the Central Bank is responsible for this issue. If the Central Bank’s expert conclusions support the implementation of the project, the Assembly will likely support it as well. Nevertheless, the scope, complexity, and urgency of the world’s challenges require careful deliberation and extensive dialogue at all levels.”
The Need for Legislation on Cryptocurrencies
The head of the Digital Economy Committee of the Economic Commission of the Assembly emphasized the necessity of drafting laws regarding cryptocurrencies, stating: “In the area of cryptocurrency exchanges, we have been reminding the government of the need for legislation in this field for the past two years. However, since the then Vice President for Economic Affairs took on the issue at the direction of the President and the National Cryptocurrency Headquarters was established, it was decided that proposals would be presented to the Assembly as a bill. We are waiting for the legal and technical reviews of the text to be finalized within the government and then for it to be consolidated in the Assembly. Overall, I can say that the Assembly’s view on cryptocurrency exchanges is to utilize them legally while also managing the associated threats and risks.”
In response to whether continued resistance to new technologies would lead to Iran falling behind in this area, he said: “Absolutely, that’s true. The development of the digital economy and related technologies has challenged traditional governance globally, and Iran is no exception. However, opposing technology is neither feasible nor reasonable, and without internal development, it effectively makes people increasingly dependent on foreign platforms and technologies, which makes governance more vulnerable.”
He noted that developing the digital economy and related technologies has challenged traditional governance, and Iran is not immune to this.
The head of the Knowledge-Based and Digital Economy Committee stated that the time for a narrow and restrictive view of transformations such as cryptocurrencies has passed. He added: “The government, the three branches of power, and the country’s security apparatus must approach technology with a view to solving national problems. Finding solutions to the governance challenges of the Fourth Industrial Revolution requires that governments, businesses, and individuals make the right strategic decisions regarding developing and implementing new technologies.”
Tavangar’s remarks come at a time when he previously viewed this field with skepticism, likely due to the challenges posed by new technologies. However, given the importance of cryptocurrencies and the blockchain ecosystem, his perspective has shifted. He remarked on this change: “In any case, policymakers must decide following technological advancements and their functionalities. This technology brings risks and threats to the people and the country, but it also offers benefits, and a managed use of it can create added value for the nation. Of course, I have never been opposed to new technologies. I have emphasized before and still pursue the idea that the country’s cryptocurrency ecosystem should be healthy and robust. I also insist that, while addressing the problems in underground areas such as money laundering or illegal currency outflows from the country, this ecosystem must serve Iran’s economy and foster the growth of new technologies.”
