More News, Rumors and Opinions Friday Night 9-23-2022
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Samson: Why is Iran turning to a new ‘digital rial’?
20th September, 2022
A national digital currency is coming to Iran, with the country’s central bank planning to launch a pilot “digital rial” project in the coming days.
The central bank digital currency (CBDC), which has also been referred to as the “crypto rial”, is expected to remain pegged at a 1:1 ratio to the rial, the national currency.
It is a project officials hope could significantly increase their control over the national currency and its users while offering new opportunities to financial actors.
Slapped with harsh United States sanctions imposed after former President Donald Trump unilaterally withdrew from a 2015 nuclear deal with Iran, when cryptocurrency was reaching highs in 2018, some officials in Tehran saw the potential of cryptocurrencies to circumvent sanctions – although that will not be the case with the digital rial, as it will only be used inside Iran’s border.
And some of the very same potential alternatives that have gotten proponents excited have led to concerns among members of the local crypto community, who fear the project could endanger privacy and security.
The digital rial will run on a platform called Borna, which was developed using Hyperledger Fabric, the open-source enterprise blockchain platform established by US technology giant IBM.
It is a permissioned distributed ledger technology (DLT) platform, which means only the central bank can decide which entities will have access, and also means the currency cannot be mined like Bitcoin and many other decentralised cryptocurrencies.
The structure allows a few select banks to maintain and update the network’s distributed ledger, where an immutable record of all transactions and activities is kept. Other entities might also be granted access in the future.
Bank users are expected to be able to hand over their rials – either in banknotes or in their accounts – to the banks in exchange for the same amount of the new digital rials that will be stored in their mobile phone wallets.
More transparency
According to Saeed Khoshbakht, one of the people who worked to develop Borna, the project is unprecedented in Iran and will provide a precedent for further projects in the future.
He also said that, even though the project was highly centralised, it would allow for more banks to get involved in the previously mentioned distributed ledger, potentially allowing for more transparency.
“For now, at least four more nodes will be designated to handle the distributed ledger. It’s true that they’re also banks, but instead of being focused in a single point, the data will now be placed across at least five points, and that number could gradually grow if the project is successful,” he told Al Jazeera.
Financial-technology companies will eventually be expected to offer rial-based financial services online, meaning that a central bank-approved pegged asset – a rial “stablecoin” – will be necessary.
While not included in its initial limited public launch later this month, Borna also foresees a competitive layer, where companies could offer services within the framework of the platform, potentially easing red tape.
Khoshbakht added, that if executed correctly, Borna could also create a chance for banks and fintechs to gain access to new fee-based revenue streams, potentially overhauling the current limited fee-based services, which have for years been a thorn in the side of cash-strapped Iranian financial services providers.
Lastly, a wide variety of smart contracts, self-executing contracts that can be automatically implemented, could be deployed on the platform, something that has yet to find widespread use across the Iranian economy.
Potential dangers
Dozens of central banks across the globe are working on their own CBDCs, and the main concern everywhere appears to be their potential impacts on citizens’ privacy.
In its draft document, the Iranian central bank acknowledges that privacy is a concern, but also points out that anonymity would add to money-laundering concerns.
“Selecting an optimal point between these two components can be one of the considerations in developing the digital rial,” it said, without elaborating.
For some members of the local cryptocurrency community, potential violations of their right to privacy are huge concerns.
The current local online banking and tax and other online record-keeping systems provide Iranian authorities with enormous supervision capabilities, but a digital rial could further expand and accelerate them, according to Hamed Salehi, a researcher who runs the crypto and blockchain-focused media and events firm BlockDays.
“This digital fiat money can be a major step and an additional way toward violating the people’s privacy and social freedoms,” he told Al Jazeera.
“For example, during the [November 2019] protests you would lose your internet and phone connectivity if you were in areas where protests were ongoing. Now, what could happen is that in addition to that, the establishment could also restrict or block your money and financial transactions based on your activities.”
Salehi also believes that the pervasive nature of malicious software in Iran could mean that hacked phones could be used to attack the digital rial app.
Effect on economy
The digital rial could end up being linked with efforts to tame Iran’s rampant inflation, which now stands at more than 40 percent.
A chief factor behind the country’s runaway inflation for decades has been a lack of financial discipline, resulting in unchecked money printing to help with perennial budget deficits.
A digital version of the country’s currency could prove to be an economic opportunity or a threat, according to electronic banking expert Nima Amirshekari.
“If implemented correctly, the project can help prevent inflation, only in the digital sector. Inflation comes from money creation, unchecked loans and unbacked money, so if you take away money in circulation and issue the same amount in digital rials, then it can help with inflation, on the condition that you can’t use the digital rial to allocate loans and credits [which would increase the amount of digital rials in circulation].”
The central bank Vice Governor for New Technologies, Mehran Mahramian, has indicated that loans are part of the process, telling state television the digital rial could help ensure that loans are invested where they are meant to be.
But Amirshekari said the same issues that have caused large amounts of non-performing loans (NPLs), bank loans that have been repaid late or are unlikely to be repaid, another longstanding problem for the Iranian banking system, could affect the digital rial.
“Authorities already know where loans go across the banking system. The issue of our NPLs is that they’ve been taken out by people or organisations who are powerful enough that they can refrain from returning the money. The same thing can happen with the digital rial.”
Amirshekari said one benefit of the project could be to increase the knowledge and expertise of the central bank on global cryptocurrencies, in turn positively hitting its regulatory stance.
A state of lawlessness and confusion has reigned over the local cryptocurrency scene for the past few years.
A central bank directive banned credit institutions and currency exchanges from handling crypto in 2018, and there have been crackdowns on crypto exchanges, but technically there has been no law to forbid the average citizen from trading. “I hope it could teach them to employ chain analysis and other technical methods to exert supervision, so they can draft useful regulation instead of outlawing or forbidding everything,” Amirshekari said. LINK
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Courtesy of Dinar Guru https://www.dinarguru.com/
Frank26 [Iraq boots-on-the-ground report] FIREFLY: The banks are putting signs out again in their windows about the open house they are inviting us citizens to next Monday. They're telling the citizens to coming in and to open accounts...and get our cards. They're talking about loans...all of this is part of a new strategy to grow Iraq's economy... FRANK: The CBI prepares you to use the new small category notes inside of your country...the same way that they have prepared the international banks to use the new small category notes in their country outside of Iraq's borders internationally...the next step will occur after Kazemi returns from New York...
Mnt Goat ...Iraq continues with this election saga. The Sadr protest deadline of Oct 1 is nearing and they told us they won’t even have the meeting with Sadr until next week...I do not believe Sadr is going to bend this time. He would rather tear apart the political system, expose the corrupt and rebuild it without Iran and their puppets. This may very well happen... [post 1 of 2....stay tuned]
Mnt Goat It won’t be very good for us investors looking for the reinstatement but at least now the process is in motion. Too bad it was not put in motion a couple years ago as we might have been to the bank by now...Many things besides the Iraqi RV are in motion to get us to where we want to have the project to delete the zeros and then the reinstatement. [post 2 of 2]
Global Crisis Is Here... Dam Is Ready to Break in Financial Markets
Stansberry Research: 9-23-2022
The Fed's efforts are futile since we're already in the early stages of a global crisis, asserts Bert Dohmen, founder and president of Dohmen Capital Research.
He tells our Daniela Cambone that the ongoing Russia-Ukraine war marks the first of what will be many conflicts moving forward as the global financial markets remain in disarray. "We have to get ready for the worst, we can't change what's happening, but we can protect ourselves," Dohmen says.
He concludes by touting natural gas stocks as a sector to explore for lucrative gains amid today's rampant inflation because," it's designed to go up in times of crisis."
Europeans can't pay heating bills, 'huge crisis' to spark 'social unrest'? - Willem Middelkoop
Kitco News: 9-23-2022
Willem Middelkoop, Founder and COO of the Commodity Discovery Fund, talks about the energy crisis in Europe, the potential for more social unrest, and which metals will be in high demand in the future. He spoke with David Lin, Anchor and Producer at Kitco News.
0:00 - Europe's energy crisis
11:30 - Economic war and reset
18:20 - Gold
21:51 - New reserve currency?
23:44 - Rare earth minerals and base metals
27:27 - Geopolitical factors
30:31 - Investment implications