Iraq's Central Bank (CBI) is preparing to launch a digital dinar as part of its transition to digital currency management, Al-Iqtisad newspaper reported on March 17.

The digital dinar will be an electronic currency issued by the CBI as an official part of the country's monetary system. It will hold the same value as traditional currency but will be traded electronically through digital wallets or authorised financial applications and would see the country move away from US control of the Central Bank of Iraq, which it has held a controlling stake in since the US invasion of 2003

Central Bank Governor Ali Al-Allaq previously stated that the financial and banking system "will witness fundamental transformations, including the decline of paper currencies to be replaced by digital payments from central banks," adding that the Central Bank is "moving to establish its digital currency to gradually replace paper currency as is happening in some central banks around the world."

Mustafa Mohammed, financial and banking affairs adviser to the prime minister and former Deputy Governor of the Central Bank, told Al-Iqtisad that the digital dinar represents a global trend in payment systems development, particularly in defining monetary units that will carry digital rights with the same legal discharge power issued by the monetary authority.

Regarding exchange rates, Mohammed explained that the official exchange rate will become the prevailing and only rate as the digital exchange rate adopted by monetary policy, predicting that "the parallel market in its current form will disappear because it will be difficult to create a secondary digital market operating outside the control of the digital monetary authority."

The prime minister's adviser indicated that implementing digital currency requires a high level of public understanding of the digital monetary system and an advanced infrastructure of information and communication technology that continuously evolves.

Economic expert Ziyad Al-Hashimi pointed out significant differences between digital currencies and cryptocurrencies: "The former are issued and regulated by central banks like the digital dollar and digital dirham, while cryptocurrencies such as Bitcoin are not subject to any official authority and their value depends on supply and demand, making them highly volatile."

Al-Hashimi noted that the Central Bank will fully support the digital dinar with a relatively stable value, similar to paper currency, but will be traded electronically only through accounts and banking wallets, helping reduce paper cash usage and achieve financial inclusion.

The expert highlighted that the primary goal of this step is to eliminate the phenomenon of cash hoarding, where citizens keep large amounts outside banks due to weak confidence in the banking system, which impedes money movement and negatively affects economic activity.