Legal, economic, and technological analysis of the role of central bank digital currencies in reducing the effectiveness of international financial sanctions on Iran

Document Type : Research Paper

Authors

1 PhD student in Criminal Law and Criminology, Emirates International Branch, Islamic Azad University, Tehran, Iran.

2 PhD student, Department of Private Law, Karaj Branch, Islamic Azad University, Karaj, Iran.

10.22124/wp.2022.15805.2431

Abstract

Central bank digital currencies, as a digital form of central bank money, have created a potential capacity to redesign some domestic and cross-border payment mechanisms. The present study, using a descriptive-analytical method and a comparative study, examines the role of digital currencies in reducing the impact of international financial sanctions, emphasizing the capacities of the Islamic Republic of Iran. The research findings show that digital currencies can reduce some of the vulnerability caused by the concentration of international financial infrastructures by reducing dependence on some traditional financial intermediaries, facilitating direct and bilateral settlement, reducing the cost and time of cross-border payments, and providing the possibility of designing programmable mechanisms. However, this capacity is not absolute and automatic, because the effectiveness of digital currencies depends on the interoperability of payment systems, the acceptance of countries and financial institutions of the transaction, cybersecurity, legal framework, international trust, and the degree of vulnerability of the network to secondary sanctions. In the case of Iran, the digital rial could be used within the framework of a broader strategy to develop bilateral and regional payments, increase the resilience of the financial infrastructure, and reduce dependence on some traditional payment channels; but realizing this potential requires a shift from a purely domestic approach to developing international interoperability, legal and institutional reforms, and the creation of a network of economic and technological partners. Accordingly, digital currencies are not considered a means of completely eliminating sanctions, but rather a potential tool for a relative and conditional reduction of their impact.

Keywords

References

 
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World Politics
Volume 11, Issue 2 - Serial Number 40
September 2022
Pages 361-399

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