By Arno Maierbrugger/Gulf Times Correspondent/Bangkok
Last week Iran made a breakthrough for Islamic cryptocurrencies by launching its own gold-backed digital coin called “Peyman,” the Persian word for covenant. The move came after the country’s central bank released an early draft of its regulations on cryptocurrencies, reversing a previous ban.
Peyman is a joint effort by four Iranian banks, namely Parsian Bank, Bank Pasargad, Bank Melli Iran and Bank Mellat, and Kuknos Company, an Iranian firm focused on tokenisation of different types of assets.
Peyman will be used to tokenise the banks’ assets and excess properties and for banking transactions. In the first phase, only institutions such as commercial banks will have access, while in the second phase individuals will be allowed to use the cryptocurrency which will be traded and available for purchase at Irana Fara Bourse, an over-the-counter market for securities and other financial instruments in Tehran. The plan is to offer a total of 1bn coins.
The new Iranian cryptocurrency is what is known in the crypto industry as a stablecoin, tokens pegged to a currency or to commodities such as precious metals or industrial metals.
In Islamic finance, cryptocurrencies are only halal when they have an “underlying value” in the form of physical assets, ideally gold, anything else is seen as pure monetary speculation.
But Peyman does not come for the sole sake of having an Islamic cryptocurrency in Iran. It is actually a way to restore trade with the world after the country has been hit by US sanctions which target the country’s oil, gas and shipping industries, as well as the financial system.
The core function of the cryptocurrency will be a blockchain-based transaction chain with other countries to evade the US sanctions and to have an alternative to the global payment standard Swift and other intermediaries.
Reportedly, Iran has already signed a blockchain co-operation deal with Russia and Armenia and is in talks with main European economies and South Africa to use sovereign cryptocurrencies as an alternative to the Swift system in order to allow the processing of international transactions.
It is believed that other countries could follow the Iranian example to develop sovereign digital coins because they are being viewed as powerful tools to break the US dollar dominance in international trade.
“It is a fact that the US dollar has evolved into a sanctioning tool,” said Erol Yarar, chairman of the International Business Forum, a Turkish business lobby group.
“The US dollar is beyond a common currency, it has lost its purpose as an international trading currency,” Yarar added, according to Turkish news agency Anadolu.
The economist is a strong supporter of a cryptocurrency system that could be used for international trade among Islamic countries, a Shariah-compliant digital currency for the use between religiously like-minded countries for the pricing of goods, cross-border transactions and currency exchange.
This proposal has been discussed by a number of Muslim nations in the recent past in order to challenge the US dollar as a sanctioning tool which works by unilaterally placing bans on dealings and transactions with countries, companies and individuals and is being enforced with the involvement of mainstream financial institutions.
Cryptocurrencies, which operate outside the established financial system, are easily able to circumvent those restrictions and help sanctioned economies to resume trade and transactions with other countries because the US would be incapable of blocking such transactions.
Some Islamic nations also consider setting up a fund emulating the International Monetary Fund business model – but based on non-interest principles – which would act as an international cooperation fund for Muslim countries and facilitate trade with a common Islamic cryptocurrency.
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