The Central Bank is only the regulator for digital currencies (CBDCs), not for other crypto-assets.

In its amendment, the parliament rescinded its previous decision to delegate regulatory authority over general cryptocurrencies and instead granted the Central Bank only regulatory authority over CBDCs.

Examining the Scope of the Central Bank’s Authority in Cryptocurrencies Based on the New Central Bank Law of the IRI

The Monetary and Banking Law of 1972 was enacted several decades ago, and the banking laws were revised. On 09/07/1402 (November 28, 2023), the new Central Bank Law of the Islamic Republic of Iran was issued. One of the responsibilities and authorities assigned to the Central Bank under this law includes actions that can be considered regulation within the scope of CBDCs.

In the initial resolution of the Islamic Consultative Assembly dated 09/19/1401 (December 10, 2022), CBDCs and cryptocurrencies were mentioned, which were challenged by the Guardian Council. In the initial resolution, terms such as CBDCs and cryptocurrencies were not defined, and the nature of these digital currencies was unclear. In the amendment dated 11/24/1401 (February 13, 2023), the Parliament’s approach focused on delegating the regulatory authority over CBDCs to the Central Bank, abandoning the delegation of authority over other crypto-assets. The Parliament’s decision was solely to recognize the regulation of CBDCs by the Central Bank; thus, only the term “CBDC” was defined.

Furthermore, in the initial version of Article 4, Note 1, it was mentioned that “deciding on the permission or prohibition of holding and trading various types of CBDCs and cryptocurrencies is the responsibility of the High Council,” which was also met with objections from the Guardian Council, as it conflicted with Article 85 of the Constitution due to its legislative nature. The Parliament, in response, first removed the reference to cryptocurrencies, signaling a shift in its stance regarding general cryptocurrencies, and then resolved the issue by adding the phrase “within the law’s framework.” After the amendment, the High Council of the Central Bank is bound by law to regulate CBDC markets and can not act beyond the authority granted by the law.

Ultimately, based on the latest amendment by the Parliament, Article 59 of the aforementioned law grants the Central Bank exclusive responsibility for issuing necessary regulations regarding payment systems, modern financial technologies related to payment instruments, CBDCs, and entities active in these areas.

After reviewing all the back-and-forths between the Parliament and the Guardian Council and the final definition of CBDC in the Central Bank Law, the following points are noteworthy:

1. The Parliament initially intended to grant regulatory authority over CBDCs and general cryptocurrencies to the Central Bank. However, in its second amendment, although the delegation of this authority was not among the Guardian Council’s objections, the Parliament ultimately abandoned the idea of granting regulatory authority over general cryptocurrencies and only granted the authority to regulate CBDCs to the Central Bank. This demonstrates the Parliament’s focus on distinguishing between different types of crypto-assets and recognizing the importance of having the appropriate authority regulate each type. As a monetary and banking regulator, the Central Bank has been designated solely as the regulator of CBDCs.

The parliament initially intended to grant the central bank the authority to regulate cryptocurrencies and digital currencies. However, its amendment decided against delegating the authority to regulate all cryptocurrencies and limited the central bank’s regulatory authority to digital currencies only.

2. A review of the CBDC definition makes it clear that the legislature intended to focus on a subset of crypto-assets primarily categorized as money. Economic scholars refer to money as anything that simultaneously serves the following three functions: a medium of exchange, a unit of account, and a store of value.

Based on this definition, CBDCs do not encompass all crypto-assets and cryptocurrencies, as only some crypto-assets can be classified as money. There are numerous Islamic jurisprudence opinions on this matter, some of which consider these assets property, while only a subset of them are classified as money. As indicated in the Central Bank’s draft report from 2018, cryptocurrencies are considered assets, some of which also function as money. That is, while all cryptocurrencies are considered assets, only those that meet the definition of money fall under the Central Bank’s legal definition of CBDC.

Digital currencies do not include all crypto-assets and cryptocurrencies because only a subset of crypto-assets are considered money.

Since CBDCs do not encompass all crypto-assets and cryptocurrencies, and only a subset of crypto-assets are classified as money, it is evident from the back-and-forth discussions between the Parliament and the Guardian Council, as well as from the definition of money, that the majority of crypto-assets do not qualify as money. Therefore, based on the Parliament’s decision, the Central Bank is not the regulator of cryptocurrencies and crypto-assets in general but only of those with monetary properties. Furthermore, their scope has also been further narrowed due to the limitations in the definition of CBDCs.