🏦🇮🇶 Is Iraq Building Legal Protection for the Iraqi Dinar? Another Major Reform Proposal Emerges
A new proposal being discussed in Iraq aims to create a Law for the Protection of Currency Issuance, designed to strengthen the Iraqi dinar, combat corruption, reduce cash hoarding, and gradually eliminate the informal economy and the parallel currency market.
📌 According to the proposal:
💵 Nearly 70% of Iraq's issued currency is estimated to remain outside the banking system.
🏦 Large cash holdings weaken monetary policy, fuel the parallel dollar market, encourage tax evasion, and reduce financial transparency.
To address these challenges, the proposal includes measures such as:
✅ Limiting the amount of cash that individuals and businesses can keep outside banks.
💳 Requiring large transactions to be processed through the banking system.
🔍 Strengthening anti-money laundering controls and requiring proof of the source of funds for major deposits.
🚫 Criminalizing the destruction or concealment of large amounts of Iraqi currency.
📊 Increasing banking transparency and encouraging more money to return to the official financial system.
💡 My Perspective
This proposal further demonstrates that Iraq is not only modernizing its banking system but also considering legal mechanisms to protect the Iraqi dinar itself while reducing the informal economy and the parallel market.
As we've discussed before, the CBI has been working to modernize banks, strengthen international compliance, expand electronic payments, and narrow the gap between the official and parallel exchange rates.
📌 In my opinion, this proposal is moving in the same direction as Dr. Shabibi's long-discussed "Delete the Zeros" project—building a stronger, more transparent, and better-controlled monetary system before any major monetary policy changes.
I've noticed something increasingly clear over the past several months: Iraq appears to place growing importance on protecting its national currency. We're seeing banking reforms, financial reforms, and now proposals for laws designed to protect the Iraqi dinar and strengthen confidence in the official financial system.
While this proposal does not announce or guarantee a future revaluation (RV), I believe it reflects a broader strategy of creating the legal, financial, and institutional foundation for a stronger national currency.
🇮🇶 We continue connecting the dots. Every reform aimed at reducing the parallel market, bringing more dinars back into the banking system, and strengthening confidence in Iraq's financial institutions is another step toward a more stable monetary future.
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TO COMBAT WASTE AND CORRUPTION: THE LAW FOR THE PROTECTION OF CURRENCY ISSUANCE IN IRAQ
According to official statements issued by the Central Bank of Iraq, the total volume of Iraqi currency in circulation is 100 trillion dinars. Based on relevant statements and analyses, 70% of this currency is not circulating within the national banking sector (both public and private) and is hoarded by individuals and companies for various purposes. The presence of cash outside the banking system has numerous negative consequences and risks for the economy. Holding cash is different from saving and hoarding money; its presence in such quantities reduces the money supply and creates an impression of illicit activity.
It also exposes its holders to various risks, including theft, assault, and damage. Furthermore, the existence of unused cash creates an incentive to convert it into other forms, some of which are detrimental. Some resort to converting dinars into foreign currencies, most notably the dollar, which puts undue pressure on demand and leads to higher exchange rates in the parallel market. Others use it for real estate purposes, such as land and buildings, creating high demand and price imbalances.
Cash can also… It is diverted to stagnant and economically unproductive uses such as gold, diamonds, and the acquisition of expensive items like watches and accessories. This encourages the illegal trade of bringing in these goods through outlets outside the authority of the state, which already exist.
The hoarding of cash is not always due to weaknesses in the banking sector. It may stem from a reluctance to disclose the source of the funds deposited. Those who hoard cash can certainly be divided into categories.
The first consists of public and private sector employees with surplus income who haven’t found suitable ways to invest it.
The second comprises business owners and investors across various sectors who receive high revenues and profits and prefer to keep all or part of their earnings in cash, believing it to be the safest and most flexible method of investment.
The third category is largely made up of tax evaders who don’t want to disclose their wealth and are waiting for an opportunity to convert it into concealed assets. The most dangerous category consists of corrupt individuals, thieves, and those with ill-gotten gains who fear exposure due to the suspicions and questions that such figures raise.
Finally, there is a category of people who cannot publicly disclose their financial dealings because the source of their funds is unknown. Illicit trade in prohibited substances such as drugs and weapons increases the hoarding of money whenever there are pressures, restrictions, or fears to convert it into funds through investments or deposit it outside the country. It is certain that the crises that befell the banks of neighboring countries are related to the increase in hoarding of money within the country.
The issue of hoarding cash is not hidden from any official body. The Central Bank is the one that announces the decrease in the percentage of uncirculated currency issued from time to time. The case of (A.J.), which is expected to be a gateway to revealing corruption, is what stirred people’s feelings about the subject, especially after showing scenes and pictures that reveal the hiding of billions in miserable ways and the burning of millions of dollars. According to leaks and expectations, there are trillions hidden in various ways in places chosen by cash hoarders.
This is a serious and important matter, especially when a percentage of the currency issued is unused or in the possession of thieves and corrupt people, with the possibility of it being damaged when the refuge is burning, burying, or other reactions. All of these things happened and are happening because the authority responsible for currency did not find the appropriate methods to attract and bring that money into local circulation.
Current instructions impose restrictions on the amount that a traveler can take out not exceeding $10,000, with the prohibition of taking out the dinar commission outside of official transfers.
We believe it has become essential for legislative and executive bodies to adopt a draft law (or amend an existing law) accompanied by regulations and instructions aimed at protecting the issuance of currency, without infringing upon personal freedoms and property rights guaranteed by the constitution and laws. This can be achieved through several means and tools:
1.the first of which is: setting a maximum limit for cash holdings, whereby any natural or legal person is prohibited from holding liquid cash exceeding 100 million dinars or the equivalent of 50,000 US dollars in foreign currencies outside the banking system. Any amount exceeding this must be deposited within six months of the law’s enactment.
2.The second is: restricting transactions to banks and subjecting all sales, purchases, and transfers of goods and services exceeding 10 million dinars to payment through banking channels (check, transfer, card, electronic wallet), making cash payments a violation with penalties.
3,The third is: activating the “From Where Did You Get This?” law, requiring every depositor with an amount exceeding 50 million dinars to disclose the source of funds, and obligating banks to audit and report any suspected money laundering.
Fourth: Criminalizing the destruction and concealment of currency. Destroying, burning, burying, or concealing the national currency is considered a violation of sovereignty and a crime of economic sabotage, punishable by imprisonment for 5-10 years plus a fine many times the amount.
5.Fifth: Tax clearance for valuable goods. Purchasing, importing, and trading any commodity or possession exceeding 50 million dinars in value (real estate, car, gold, watches, precious items) requires submitting a tax clearance certificate and payment exclusively through the banking system.
6.Sixth: Bank transparency. The Central Bank shall require government and private banks to adopt transparent windows for transfer and deposit operations, similar to the dollar sale window, and to publish a weekly report on the volume of major deposits and withdrawals.
7.Seventh: Granting a reward of 5% of the seized amount to anyone who reports illegal cash outside the regulations, with a guarantee of legal immunity for the informant and confidentiality of information.