Iran has announced its intent to establish a national cryptocurrency. In a tweet posted Wednesday, an Iranian official said that a test model for a “cloud-based digital currency” is being developed for submission to the Iranian banking system.
The official, Mohammad-Javad Azari Jahromi, heads Iran’s Ministry of Information and Communications Technology. Jahromi made the announcement after a meeting with the state-owned Post Bank of Iran.
It is not yet clear what role the currency will play in the Iranian banking system. Iran’s central bank has hinted at regulating cryptocurrencies in the past, even suggesting the adoption of an “infrastructure” to integrate digital currencies into the country’s financial system.
But the central bank backpedaled on Wednesday just as news of the state-sponsored digital currency went public. In a statement reported by Iran Front Page news, the Central Bank of Iran highlighted the “highly unreliable and risky” nature of cryptocurrency markets. It warned that Iranians “may lose their financial assets” in a space marked by extreme volatility and “pyramid scheme”-like businesses.
The announcement comes on the heels of Venezuela’s oil-backed “petro” cryptocurrency launch earlier this week. Venezuelan President Nicolas Maduro claims that the cryptocurrency has raised over $700 million for the cash-strapped country. But doubts remain over the currency’s long-term viability, as Venezuela struggles to profit from the oil reserves that are supposed to back it.
There are fears that the rise of state-backed cryptocurrencies could pose a challenge to international efforts to regulate financial transactions and impose sanctions. The countries most interested in the technology – Iran, Venezuela and Russia – are all targeted by U.S. sanctions.
The Treasury Department has warned that U.S. citizens purchasing these currencies may be violating sanctions laws. And just last month, Treasury officials told Congress that rogue states and international criminal organizations are using virtual currencies “to launder their ill-gotten gains.”