Iran’s top banks launch blockchain platform to boost ailing banking system

The biggest players in Iranian banking have joined forces in an effort to empower an ailing banking system that has long suffered from a slew of major issues — including a hefty credit crunch. There is no shortage of potential pitfalls and challenges, but the blockchain-enabled platform they have established — and its native gold-backed cryptocurrency — may prove a crucial source of cash and public trust in a not too distant future.

During the past year, the technology and payment system arms of four major Iranian banks — Parsian, Pasargad, Mellat and Melli —- in addition to Tosan, a leading provider of banking software solutions, have been developing Kuknos (“Phoenix”). Using distributed ledger technology, the blockchain platform’s ultimate goal is to make it possible for financial entities to issue digital tokens for a variety of assets and therefore increase financial inclusion. Its most immediate target, however, is to allow banks to tokenize and then liquidize their so-called “frozen” or non-productive assets.

Most Iranian banks are cash-strapped because they don’t have access to a significant portion of their assets. Those non-productive assets are largely the result of years of speculative activities, mostly in the lackluster property market. While there is no definitive account of the exact value of these assets, Minister of Economic Affairs and Finance Farhad Dejpasand recently estimated that it exceeds 1 quadrillion rials ($23.8 billion).

Kuknos, which was unveiled at a major banking conference in Tehran in late January, is an independent “fork” of the Stellar network, an open-source decentralized protocol for digital currency for fiat currency transfers. Its native currency is called PayMon (PMN), each unit of which is equal to and backed by 30 milligrams of 24-karat gold. Each PMN is now worth 156,581 rials ($3.72).