Iran's New Currency: Unpacking The Toman Transition

Mr. Arjun Russel II 19 Jun 2025

The landscape of Iran's economy is undergoing a monumental shift, spearheaded by the introduction of its new currency, the Toman. This pivotal change aims to reshape daily transactions and address long-standing economic challenges that have plagued the nation for decades. The transition from the familiar rial to the new currency of Iran represents more than just a name change; it signifies a strategic redenomination designed to simplify financial dealings and, perhaps, to subtly address the pervasive issue of inflation.

For years, the rial has been the official currency, yet its journey has been marked by significant volatility and persistent depreciation against major global currencies. This has led to a peculiar situation where, despite the rial being the legal tender, the term "toman" has been colloquially used in daily transactions, often referring to 10 rials. As Iran prepares for a full transition to the new currency of Iran, understanding the intricate details and broader implications of this move is crucial for both its citizens navigating daily life and international observers tracking the nation's economic trajectory.

The Rial: A History of Volatility
The Toman Emerges: A Redenomination Strategy
- The Four-Zero Reduction
- Timeline of the Transition
Addressing Inflation and Simplifying Transactions
New Designs and Security Features
The Struggle with Depreciation
- Record Lows and Public Impact
The Central Bank's Response and New Notes
Economic Implications and Global Tensions
What the Future Holds for Iran's Currency

The Rial: A History of Volatility

For generations, the Iranian rial (IRR) has been the official currency of Iran, deeply embedded in the nation's economic fabric. However, for those unfamiliar with Iran’s money system, things can get a little confusing, primarily due to the informal, yet pervasive, use of the term "toman." Historically, the toman was a coin with the same gold content as a British sovereign, equivalent to 10 rials. Over time, this equivalence stuck, and people have been using "toman" to mean 10 rials in everyday transactions, even as the official currency remained the rial. This dual system, where prices are often quoted in tomans but paid in rials, has long been a source of confusion, particularly for visitors and those conducting larger financial dealings.

The rial's journey has been far from stable. It has been subjected to significant pressures from both internal economic challenges and external geopolitical factors. Decades of sanctions, fluctuating oil prices, and domestic economic policies have contributed to a consistent erosion of its value. This depreciation has made large transactions cumbersome, requiring vast sums of rials, which translates into bulky stacks of banknotes for even moderate purchases. This practical inconvenience, coupled with the psychological impact of seeing the national currency lose value so dramatically, has fueled the push for a fundamental change, paving the way for the official reintroduction of the toman as the new currency of Iran.

The Toman Emerges: A Redenomination Strategy

The transition from the rial to the toman is not merely a cosmetic rebranding; it's a strategic redenomination, a bold move by the Iranian government to streamline its monetary system. Long called the rial, Iran's money will soon likely be called the toman, marking a significant chapter in the country's economic history. The name of the new currency of Iran will officially be ‘toman’, a name already deeply ingrained in the public consciousness.

The legislative process for this change began several years ago. In July 2019, the Iranian government approved a bill to change the national currency from the rial to the toman, with one toman equalling Rls 10,000. This ambitious process was reportedly estimated to cost around $160 million. The proposal then moved through the parliamentary process, finally gaining approval from the Iranian parliament in May 2020. This formal endorsement solidified the government's commitment to this major currency reform, setting the stage for the practical implementation of the new currency of Iran.

The Four-Zero Reduction

At the heart of this redenomination strategy is the removal of four zeros from the national currency. This strategic move aims to simplify transactions by removing four zeros from the national currency, the rial, and replacing it with the toman. For instance, what was previously Rls 10,000 will now simply be 1 Toman. This reduction aims to make prices and financial figures much more manageable, reducing the need for large denominations and simplifying accounting processes for businesses and individuals alike.

While the primary stated goal is simplification, some economists and observers suggest that the move also serves a secondary, less explicit purpose: to mask inflation. By effectively reducing the numerical value of goods and services, the government might be attempting to mitigate the psychological impact of soaring prices. Iran launched plans to switch its currency to the toman in 2021, replacing the rial by removing four zeros in a bid to mask inflation. Whether this redenomination genuinely tackles the root causes of inflation or merely offers a temporary psychological reprieve remains a subject of ongoing debate among economic analysts.

Timeline of the Transition

The journey to fully implement the new currency of Iran, the toman, has been a phased one, spanning several years. Initially, the change was likely to occur between 2020 and 2022, following the parliamentary approval. Iran launched plans to switch its currency to the toman in 2021, initiating the process of preparing the public and the financial system for the shift. This included the introduction of new banknotes and a gradual phasing out of older rial denominations.

The Central Bank of Iran has been actively involved in this transition. The banknotes of 1 new toman (IRT1.1) and 2 new toman (IRT2.1) announced in 2021 are being issued to circulation today, signifying the tangible introduction of the new currency. These new notes will co-circulate with current banknotes expressed in rials during a transitional period, allowing for a smoother adjustment for the public. Most recently, Central Bank Governor Mohammad Reza Farzin announced that Iran is set to implement a significant currency redenomination in 2023, indicating the full operationalization of the toman system. This extended timeline reflects the complexity of such a massive monetary overhaul, requiring careful planning and execution to minimize disruption.

Addressing Inflation and Simplifying Transactions

The core motivation behind introducing the new currency of Iran, the toman, revolves around two critical objectives: addressing the pervasive issue of inflation and simplifying everyday transactions. For years, Iranians have grappled with hyperinflation, which has drastically eroded the purchasing power of the rial. The sheer number of zeros required for even small purchases has made financial calculations cumbersome and contributed to a sense of economic instability. Imagine paying millions of units for basic groceries – this was the reality for many Iranians.

By removing four zeros, the government hopes to make prices more manageable and understandable. This strategic move aims to simplify transactions by removing four zeros from the national currency, the rial, and replacing it with the toman. This simplification is not just about convenience; it can also reduce errors in transactions, streamline accounting for businesses, and potentially improve public confidence in the currency. While the redenomination itself does not directly tackle the root causes of inflation, it can, as some analysts suggest, be seen as a bid to mask inflation by presenting a numerically smaller, and perhaps psychologically more stable, currency. The new currency of Iran has indeed brought about significant economic change, forcing a re-evaluation of pricing structures and financial habits across the country.

New Designs and Security Features

Beyond the redenomination, the overhaul of Iran's currency also extends to the physical attributes of its banknotes. The rial, Iran's official currency, has undergone a major overhaul, not just in its denomination but also in its design and security features. In 2021, the Iranian government introduced the new currency, which has a different design and enhanced security features, signaling a modern approach to currency management.

This change was aimed at reducing counterfeiting and improving the currency's overall quality. Counterfeiting has been a persistent problem, undermining public trust and adding to economic instability. By incorporating advanced security measures, the Central Bank aims to make the new Toman banknotes more difficult to forge, thereby protecting the integrity of the financial system. These new banknotes, including the 1 and 2 new Toman denominations, are part of a new family of currency started last year. They are designed to co-circulate with current banknotes expressed in rials during the transition period, ensuring a smooth and secure shift to the new currency of Iran.

The Struggle with Depreciation

Despite the strategic move to introduce the new currency of Iran, the underlying economic pressures on the rial have persisted, leading to continued depreciation against major foreign currencies, particularly the U.S. dollar. This ongoing struggle highlights the deep-seated economic challenges that a mere redenomination cannot fully resolve without fundamental policy changes and a more stable geopolitical environment.

The rial has repeatedly hit new lows, reflecting the severe economic strain on the country. For instance, Iran’s currency hit a new low on a recent Saturday with $1 costing 1,043,000 rials, and it was warned that it could fall even further as global tensions rise. Just as the country had finished celebrating Nowruz, the Persian New Year, the rial faced renewed pressure. Iran’s rial currency traded at a record low against the U.S. Dollar as the country returned to work after a long holiday, costing over 1 million rials for a single greenback as tensions mounted. This rapid devaluation underscores the fragility of the Iranian economy in the face of international sanctions and domestic policy challenges.

Record Lows and Public Impact

The dramatic fall in the rial's value has had a profound impact on the daily lives of ordinary Iranians. On a recent Sunday, as its people celebrated the Persian New Year, Iran’s currency fell to a record low, plunging to 613,500 to the dollar. This sharp decline during a national holiday, when many businesses were closed, created significant anxiety. On Sunday, people were trying to exchange rials for foreign currency at Tehran’s main hub of exchange shops in Ferdowsi Street, but most were closed due to the Nowruz holidays, which are typically a period of celebration and family gatherings.

The inability to exchange rapidly depreciating rials for more stable foreign currencies, coupled with the closure of exchange shops, left many feeling helpless. The U.S. dollar reached a new high against Iran’s currency on a Wednesday, further exacerbating the situation. This constant depreciation diminishes purchasing power, fuels inflation, and creates immense financial insecurity for households, making it increasingly difficult to afford basic necessities and plan for the future. The introduction of the new currency of Iran, the toman, is therefore viewed by many as a necessary, though insufficient, step to alleviate these pressures.

The Central Bank's Response and New Notes

In response to the persistent depreciation of the rial, the Central Bank of the Islamic Republic of Iran has taken various measures, including the issuance of new banknotes with higher denominations. This move is often a practical necessity when a currency's value falls dramatically, making lower denominations impractical for everyday transactions.

The Central Bank of the Islamic Republic of Iran announced on March 15 that it had released a new series of 2 million rial notes as the value of the currency continued to fall. This illustrates the extent of the devaluation, as such a high denomination note becomes necessary for common transactions. While the official exchange rate puts 2 million rials as $47.51, independent estimates often claim it is at much lower levels, with one outlet saying each of the new notes is worth significantly less in real terms. This discrepancy between official and market rates further complicates the economic landscape for Iranians.

Furthermore, as part of the broader currency reform, the Central Bank of Iran has finally announced its plans to issue banknotes denominated in tomans, equal to 10,000 rials. This formal issuance of Toman-denominated notes marks a crucial step in the full implementation of the new currency of Iran, providing tangible evidence of the transition and solidifying the toman's place as the official medium of exchange.

Economic Implications and Global Tensions

The introduction of the new currency of Iran, the toman, occurs within a complex web of economic challenges and heightened global tensions, which significantly influence its potential success. Domestically, the Iranian economy grapples with high inflation, unemployment, and the lingering effects of international sanctions. An economist warned that without an agreement with Washington soon, inflation could climb above 40% before the Iranian New Year in March, underscoring the urgency of resolving external pressures.

The value of the rial, and by extension the new toman, remains highly sensitive to geopolitical developments. Uncertainties about Donald Trump's imminent arrival in the White House and tensions with various international players have historically caused significant fluctuations in Iran's currency. These external factors can quickly negate any internal efforts at economic stabilization. Moreover, the global financial landscape is itself in flux, with discussions about new currency paradigms. Last month, in New Delhi, Alexander Babakov, deputy chairman of Russia’s State Duma, said that Russia is now spearheading the development of a new currency, hinting at a broader move away from dollar dominance in some parts of the world. While not directly related to Iran's redenomination, such global shifts can create both opportunities and challenges for Iran's new currency, depending on how it navigates these changing dynamics and seeks to integrate into alternative financial systems.

What the Future Holds for Iran's Currency

The transition to the new currency of Iran, the toman, is a monumental undertaking with far-reaching implications for the nation's economy and its people. While the redenomination primarily aims to simplify transactions and potentially mitigate the psychological impact of inflation by removing four zeros, its long-term success hinges on much more than just a numerical adjustment. The currency change is a tool, not a magic bullet, for Iran's economic woes.

For the toman to truly stabilize and gain public confidence, fundamental economic reforms are necessary. This includes addressing the root causes of inflation, fostering sustainable economic growth, and improving the country's trade relations. The ongoing struggle with depreciation, as evidenced by the rial's record lows against the U.S. dollar, underscores the persistent challenges. Global tensions, particularly those with the United States, continue to exert immense pressure on Iran's financial stability, making the path forward for the new currency of Iran inherently uncertain. The co-circulation of rial and toman notes during the transition period will also require careful management to avoid confusion and ensure public acceptance. Ultimately, the future of the toman will be a testament to Iran's ability to navigate its complex domestic and international landscapes, striving for economic resilience in a volatile world.

Conclusion

The introduction of the new currency of Iran, the Toman, represents a significant and multi-faceted endeavor to reform the nation's monetary system. This strategic redenomination, which involves removing four zeros from the existing rial, aims to simplify daily transactions, reduce the burden of large numerical values, and, to some extent, manage the public perception of inflation. Beyond the numerical change, the overhaul includes new banknote designs and enhanced security features designed to combat counterfeiting and improve the overall quality of the currency.

However, as the transition unfolds, it's clear that the Toman's success is deeply intertwined with Iran's broader economic health and its geopolitical standing. The persistent depreciation of the rial, driven by domestic challenges and international tensions, highlights that currency redenomination is merely one piece of a much larger economic puzzle. While the new currency offers practical benefits and a fresh start, lasting stability will depend on fundamental economic reforms and a more predictable global environment. What are your thoughts on Iran's bold currency reform and its potential impact? Share your insights in the comments below, or explore our other articles on global economic shifts to deepen your understanding of these critical financial transformations.

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Iran's New Currency: Unpacking The Toman Transition

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