Can Iran's Central Bank Avoid U.S. Sanctions Through its Own Digital Currency?
Since the reinstatement of sanctions in 2018, the Iranian government's stance on cryptocurrencies has changed from outright banning them to potentially creating its own digital currency via blockchain technology!
Reports claim that the Islamic Republic released a draft regarding a state-backed cryptocurrency. It's also thought this alleged government-backed cryptocurrency could act as a vital tool to escape the dollar's economic influence and create an effective alternative to SWIFT, which recently suspended services to most Iranian banks in November 2018.
The new digital currency is expected to be rolled out in two phases with it being a virtual version of the national currency, the Iranian rial.
SWIFT's recent suspension and U.S. economic sanctions have financially starved Iran, preventing it from paying for imports and receiving payments for exports. Reinstating sanctions has also resulted in a currency crisis, pushing Iran to the brink of economic ruin.
Russia, a close ally of Iran, also had sanctions imposed during the Ukrainian crisis. Russia responded with its own sanctions, banning food imports from the E.U., U.S.A., and several other nations.
Many nations in the East now seek to de-dollarize their economies and create competing financial systems independent of the dollar and Western institutions, such as SWIFT.
Developing an independent financial system using blockchain and distributed ledger technology (DLT) could give Iran's economy some needed independence and loosen the sanction's stranglehold. However, this depends on how effective the new system is on a global level, and not just a national level.
Venezuela also attempted to create its own digital currency to avoid sanctions, but it raised many red flags around its legitimacy and purpose.
BRICS nations and its allies, such as Iran, could use new technological solutions provided by blockchain/DLT to create a financial, tokenized market of their own outside the dominance of the West's dollar/euro-powered system and provide fresh competition to companies such as SWIFT.