It appears that there is no stopping Iran in its quest to build a domestic cryptocurrency and blockchain technology framework. Whilst we recently reported that the Iranian Central Bank had issued its first regulatory framework for cryptocurrency based legislation, more developments have since surfaced.
According to the Finance Tribune, an English-speaking Iranian economic publication, four Iranian financial instructions have backed plans to issue a cryptocurrency token backed by Gold.
The four institutions in question – Bank Mellat, Bank Pasargad, Parsian Bank and Bank Belli Iran, have given the green light for the token, which is set to be called the ‘PayMon’.
The publication continues to add the token will be listed on an OTC (Over-the-Counter) cryptocurrency exchange called Iran Fara Bourse. Moreover, the underlying technical fundamentals will be facilitated by a blockchain entity known as Kuknos.
According to a director from Kuknos, the Gold-backed token issuance will allow banks to tokenize their assets. The Financial Tribune claims that in total, 1 billion PayMon tokens will be issued.
The Iranian-Backed Paymon Token May Allow Investors to Purchase Gold
Whilst further details are still in waiting, cryptocurrency tokens that are backed by hard assets most commonly tie the value of the cryptocurrency to that of the asset in question. As such, it is a mechanism that allows investors to purchase hard assets without needing to actually hold the asset itself.
This is different to a more traditional ETF (Exchange Traded Fund), insofar that those who obtain ETF contracts do not actually own the underlying asset. Instead, ETF investors simply speculate on whether the value of the asset will go up or down. However, it is also important to note that ETFs offered via U.S. based exchanges operate in a highly stringent regulatory environment.
Read: What is a Bitcoin ETF?
On the other hand, it is often noted that blockchain assets are an ideal conduit for indirectly owning hard assets. The key reason for this is that token ownership can be stored securely on the blockchain ledger, meaning that investors can also freely trade the tokens on the open marketplace. Moreover, a Gold-backed cryptocurrency token can also facilitate purchases for much smaller amounts, without the investor being penalized.
Iran’s Quest to Avoid U.S. Sanctions Appears to be Growing
The news of the Gold-backed PayMon token follows on from the recently reported story of Iran’s negotiations with multiple nations with the view of carrying out financial transactions using cryptocurrency. The Tehran Times report stated that Iran was in discussions with 8 jurisdictions – notably South Africa, Switzerland, Germany, Russia, Austria, France and the United Kingdom.
However, whilst doing business with Russia would not be a surprise, it remains to be seen how organizations from the remaining 7 nations will have the capacity to trade with Iran, especially considering the recently re-enacted U.S. trade sanctions.
Governmental Interest in Asset-Backed Cryptocurrency Tokens Continues
This isn’t the first time that a jurisdiction has attempted to use national reserves to back a cryptocurrency token. Venezuela and its infamous Petro token was originally claiming to be backed by Gold in its entirety, however this was soon changed to other assets. At the time of writing. The Petro token claims to be backed by Gold (20%), Iron (20%) and Diamonds (10%), with the rest allegedly backed by Gold.
The U.S. regime, including President Trump himself, quickly denounced the Petro token earlier in 2018. In fact, Trump signed an executive order increasing U.S. sanctions to ensure that they also covered the Petro token. Whilst it remains to be seen what type of framework the PayMon token will take, if its key purpose is to assist in circumventing U.S. sanctions, this will certainly be no easy feat.
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