How Iran is using blockchain to reform its ailing banking sector
Will blockchain tech be able to help?
Iran is currently trying to use blockchain technology to solve one of its biggest problems: an outdated banking and finance infrastructure.
However, rumors persist that the project is nothing but a smokescreen, aimed at developing a financial system capable of circumventing U.S. sanctions via the use of distributed ledger technology (DLT) and a state-backed cryptocurrency.
The Borna Blockchain platform
Dubbed “Borna”, Iran’s bespoke blockchain protocol runs on the Hyperledger Fabric framework developed by IBM, which is an open source blockchain environment for developing enterprise-level DLT solutions.
The Borna project is a partnership between the Informatic and Services Corporation (ISC) department of the Central Bank of Iran (CBI), and also Tehran-based Areatak – a blockchain solutions developer.
According to the white paper for the Borna blockchain project, the platform will have two main layers, competitive and non-competitive. The competitive layer will be for on-boarding commercial banks and crypto platforms, while the non-competitive layer is where the CBI hopes to use as a sandbox for testing protocols to be employed in the nation’s financial sector.
In an interview with local Iranian media platform Al-Monitor at the start of May 2019, the CEO of Areatak, Saeed Khoshbakht, commented on the Borna platform:
“In terms of international presence, Borna developers are striving to use platforms, tools, and solutions that are globally accepted in building the country’s new technical infrastructure. Borna’s developers are trying to gradually turn international frameworks into a part of the platform’s internal policies.”
Revamping Iran’s Financial Industry
Since the emergence of blockchain technology, numerous commentators have said that DLT has the potential to disrupt the global financial process. Iran, via the Borna blockchain project, is trying to utilize the emerging technology to breathe new life into its failing banking sector.
The CBI plans to use the transparency and immutability of the Borna platform to combat money laundering and other forms of financial crimes. The Iranian apex bank also hopes Borna will help commercial banks upscale their operating protocols to meet with international standards.
Banks will be able to offer similar competitive products and services on the Borna platform, while earning revenue from numerous fee-based models. The CBI also plans to integrate know-your-customer (KYC) protocols in the Borna paradigm, as the administration of President Hassan Rouhani pushes forward with robust banking reforms.
Given the decision of the U.S. President to renew economic sanctions against Iran, there has been some speculation that the Borna project is an attempt to skirt those restrictions. SWIFT, the global settlements system for banks, has already delisted several Iranian banks.
However, project stakeholders say Borna does not have any cryptocurrency token issuance
Also, any plans to integrate the creation of tokens would be at the discretion of the CBI and such tokens will act a rial-backed digital currency for settlements in local transactions.
The future is uncertain for Iran’s financial and banking sectors, but it seems clear that the future will be severely linked to the crypto world, so it will be interesting to see what is the impact of this move by the country’s banks to move to crypto technologies.
What do you think? Is blockchain still a viable solution to modern problems? Let us know down below in the comments or carry the discussion over to our Twitter or Facebook.
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