Introducing Central Bank Digital Currency and Explaining Its Importance in Crisis and Wartime Situations
Abstract
One of the incidents during the 12-day imposed war by Israel against Iran that threatened the country’s economic security was cyberattacks on several banks, including Bank Sepah. Based on this, finding passive defense solutions in the monetary domain has become a key necessity in today’s circumstances. One such solution is increasing the cash withdrawal limit from ATMs, which can partially substitute for bank accounts. However, a more effective proposal is the implementation of a Central Bank Digital Currency (CBDC), so that in the event of a threat to people’s bank accounts held by commercial banks, the CBDC can function as a parallel monetary system—serving as a substitute for those accounts and ensuring that financial transactions in the market are not disrupted.
The Central Bank Digital Currency—which we refer to simply as “digital currency”—has various dimensions and characteristics, and can bring numerous benefits as well as challenges. In this article, we propose a version of the CBDC specifically designed to meet the critical needs of the country during wartime, in such a way that a parallel monetary system is established while avoiding, as much as possible, the general challenges associated with digital currency.
In what follows, we first describe the features of the digital currency needed in wartime conditions, then outline its potential benefits and challenges, and finally offer recommendations based on the current situation.
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Features of a Central Bank Digital Currency Needed in Wartime Conditions
To ensure resilience during crises and wartime, a Central Bank Digital Currency (CBDC) should be designed with minimal yet effective features:
- Token-Based: Enables programmability and higher flexibility.
- Retail-Oriented: Designed for everyday public transactions, not interbank use.
- Non-Interest-Bearing: Serves purely as a parallel payment method.
- Standard Identity Verification: Same level as current banking systems—no stricter or looser.
- Intermediated Model: Involves banks or authorized intermediaries, balancing control and distribution.
- Flexible Transfer Mechanism: Can support both centralized (e.g., RTGS) and decentralized (DLT) systems.
- Offline Payment Capability: Ensures continued transactions even without internet access, albeit with limited amounts.
Benefits of Central Bank Digital Currency (CBDC)
CBDC supports the digital economy, improves payment safety and inclusion, and preserves monetary sovereignty. In wartime, its main benefit is ensuring a parallel, resilient payment system that allows transactions and government transfers to continue despite cyberattacks or banking disruptions.
Challenges of Central Bank Digital Currency (CBDC)
CBDC challenges include minor effects on monetary policy (if non-interest), cybersecurity risks, high implementation costs, low public adoption, and legal adjustments needed.
Current Status and Recommendations
Part of Iran’s Central Bank Digital Currency project (“Digital Rial”) has been implemented, enabling features like converting Rial to digital currency and wallet-to-wallet transfers. Most key features (token-based, retail, non-interest, intermediary model, decentralized transfers) are in place, but offline payments are not yet activated.
Recommendations include enhancing infrastructure security, fully separating the Digital Rial system from traditional banking infrastructure, onboarding more banks, enabling payment terminals to accept Digital Rial, activating offline payments, and facilitating interoperability between different mobile wallets to create a resilient parallel payment system for crisis situations.
This study was conducted at Dina Think Tank by Yaser HajiPour in 2025.
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