Iran's Central Bank (CBI) will commence a trial of its central bank digital currency (CBDC), the digital rial, on Kish Island starting in July. According to an announcement on June 19, customers of the banking network and tourists can utilize digital rial wallets to conduct transactions and transfers between wallets via barcode, eliminating the need for paper money or bank cards.

The CBI emphasized that the CBDC operates independently of bank accounts and does not require interbank settlement. Recipients can directly transact using the CBDC upon receipt, without the involvement of intermediaries.

During the trial phase, two private banks, Mellat Bank and Tejarat Bank, will participate alongside banking and payment networks. Kish Island, chosen for its status as a free trade zone with 140,000 residents and 12 million annual visitors, provides an ideal environment to pilot the digital asset.

Highlighting the digital rial's programmability, the CBI described this feature as pivotal for innovating new business models such as e-commerce and bolstering the digital economy.

The CBDC initiative aims to enhance payment infrastructure resilience and stability, improve efficiency, introduce new payment tools, replicate the role of electronic banknotes for small transactions, and manage risks associated with the proliferation of private currencies. The CBI also noted that the digital currency will enhance user convenience while boosting payment security.

Iran has been developing its CBDC since at least 2021, conducting initial tests in banks and shops in 2022 and launching a limited trial in 2023. Reports suggest Iran and Russia are exploring the use of CBDCs to circumvent sanctions, indicating broader geopolitical implications for digital currencies.

Despite its progress with CBDCs, Iran maintains a cautious stance on cryptocurrencies, prohibiting local financial institutions from handling them while allowing peer-to-peer transactions to thrive. Import companies are permitted to use crypto for business transactions, primarily to evade US sanctions.