Details Emerge on Iran’s XLM-Based Gold-Backed Cryptocurrency

Iran’s new gold-backed cryptocurrency “PayMon” will be technically based on the Stellar Lumens (XLM) network (which is an open-source codebase), and will trade in “special exchange offices.” These details emerged during a Sputnik interview with Hamid Reza Shaabani, founder of Iranian blockchain company ArzDigital.

As CryptoGlobe reported earlier this month, a company called Ghoghnoos (ققنوس - “phoenix” or “gryphon”in Persian) and four national banks are cooperating with Iranian authorities to produce the PayMon system.

The principal aim of PayMon is to provide a way for Iran to trade around US-sponsored sanctions, which have been increasing under Donald Trump’s push to scuttle (and renegotiate) the Obama-era “Iran deal.”

Commenting on the potential fulfilment of gold for tokens, Shaabani said that the “contract with [Ghoghnoos] stipulates that token holders can receive gold, but the details are not clear yet.” He also said that the crypto will be mostly traded by “special exchange offices,” adding that “It's likely that currencies will be traded in major international currency exchange points.”

Golden Ticket

Iran has been seeking to increase its internal mining production of gold and other precious metals such as copper, in the wake of sanctions which partially targeted these items. Gold has been used in past years to get around sanctions, specifically those that predated the Iran Deal. Gold has helped Iran funnel billions of dollars around sanctions, via Turkey and Turkish nationals.

It is little wonder then that the Central Asian country has eventually thawed to the idea of a cryptocurrency, which is capable of transferring value with uncensorable impunity depending on how it is designed.

Iran joins the Venezuelan government among countries to adopt a state-backed crypto, with Russia also playing with the idea - all for the same general purpose of skirting US-backed sanctions.

Also in the realm of centralized, non-public stablecoins, the JPMorgan Chase mega-bank launched its own a few days ago. The coin will not be widely available, with only entities vetted by the bank having access to the private crypto.

IMF Predicts Stablecoins Will Challenge Cash and Bank Deposits

Samuel Haig

The International Monetary Fund (IMF) has published a paper that launches a new series of work seeking to “provide insight into the intersection of technology and the global economy.”

The paper, titled, 'The Rise of Digital Money,' was authored by Tobias Adrian and Tommaso Mancini Griffoli, and seeks to examine the challenges that electronic forms of money pose to legacy financial institutions and regulators.

IMF Argues Stablecoins Are Less Risky Than Cryptocurrencies

The authors anticipate that cash and bank deposits - “the two most common forms of money” - will “face tough competition and could even be surpassed” by emerging electronic monetary commodities, such as stablecoins.

The paper asserts that stablecoins are more likely to challenge existing payment systems than traditional cryptocurrencies, arguing that speculative cryptocurrencies are “by far” riskier - with Bitcoin (BTC) producing averages daily price fluctuations approximately 10 times higher “than in most G7 currency pairs, and even a little higher than in the Venezuelan Bolivar to U.S. dollar exchange rate.”

Issuer Credibility and Underlying Asset Volatility Among Issues Brought By Stablecoins

While the paper emphasizes the advantages stablecoins offer over traditional monetary forms, such as fast and frictionless payments, and reduced price volatility when compared to speculative crypto assets, the IMF expresses concerns pertaining to fundamentals underpinning stablecoins.

The authors warn that stablecoins: “use some variation of a simple system to stabilize value, which is not always credible,” adding that while other cryptocurrencies are “akin to a floating exchange rate,” managed stablecoins “resemble managed exchange rates.”

“However, we know too well the common fate of pegs. When a country’s economic fundamentals are off-kilter, the central bank can run out of the foreign exchange reserves needed to purchase domestic currency in the marketplace. Providers of managed coins can also run out of assets to support the price of their coins, especially because they may stand on shaky fundamentals—use determining value, and value encouraging use.”


IMF Advocates Active Regulatory Role for Central Banks

The paper emphasizes “important role” central banks will play in guiding the trajectory and forms of digital monetary commodities through regulatory measures.

The authors suggest that “One solution is to offer selected new e-money providers access to central bank reserves, though under strict conditions,” adding: “Doing so raises risks, but it also has various advantages. Not least, central banks in some countries could partner with e-money providers to effectively provide ‘central bank digital currency (CBDC)’, a digital version of cash.”

However, the paper advocates an alternative public-private model, called the “synthetic CBDC (sCDBC).” The sCBDC system would see central banks offer settlement services to virtual money providers, including access to central bank reserves, however, “all other functions would be the responsibility of private e-money providers under regulation.”