The Geopolitical Risks of Crypto Infrastructure: A Case Study of Iran's IRGC and UK-Based Exchanges

The rise of decentralized finance (DeFi) was once hailed as a revolution that would democratize access to global capital. But as blockchain infrastructure has matured, it has also become a tool for geopolitical actors to circumvent traditional financial systems. A recent case study involving Iran's Islamic Revolutionary Guard Corps (IRGC) and UK-registered crypto exchanges underscores how state-backed entities are weaponizing lightly regulated markets to evade sanctions-a trend with profound implications for investors in both crypto-native and traditional asset classes.

A $1 Billion Sanctions Evasion Network

Between 2023 and 2025, the IRGC leveraged two UK-registered exchanges, Zedcex and Zedxion, to move over $1 billion in stablecoins, primarily USDT on the TRON blockchain according to TRM Labs. These platforms processed approximately 56% of their total transaction volume through IRGC-linked addresses, with flows peaking at $619.1 million in 2024-87% of the year's total activity. By 2025, while the volume had dipped to $410.4 million (48% of total), the pattern remained clear: the IRGC had established a reliable, decentralized pipeline to bypass Western financial restrictions.

This network relied on a combination of offshore intermediaries and domestic Iranian crypto services, enabling the IRGC to convert sanctioned assets into digital cash and re-enter global markets. The use of TRON's USDT, a stablecoin known for its low transaction fees and fast processing, allowed the group to obscure the origin of funds while exploiting the UK's relatively permissive corporate registration rules.

The Architecture of Evasion

Zedcex and Zedxion, though legally distinct entities, function as a single enterprise with shared directors. This structure highlights a critical vulnerability in lightly regulated markets: the ability to create opaque corporate shells that mask state involvement. The exchanges' operations also intersect with figures like Babak Zanjani, a former sanctions-evasion financier sanctioned for laundering oil revenue for the IRGC, who re-emerged in 2025 with ties to regime-linked economic projects.

Blockchain analysis firms like TRM Labs and Nominis have documented how the IRGC's strategy mirrors traditional "shadow banking" systems but with enhanced resilience. Unlike cash-based networks, which are traceable and perishable, blockchain enables near-instant, borderless transfers that are difficult to intercept. For the IRGC, this represents a functional alternative to the pre-digital era of sanctions evasion, where intermediaries like gold smugglers or shell companies carried significant operational risk.

Implications for Global Investors

The case of Zedcex and Zedxion signals a growing risk for investors in crypto infrastructure. First, it exposes the limitations of current compliance frameworks. While traditional financial institutions are bound by Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, many crypto platforms operate in regulatory gray zones-particularly those registered in jurisdictions with lax enforcement. This creates a two-tier system where bad actors can exploit arbitrage between heavily regulated and lightly regulated markets.

Second, the IRGC's success in weaponizing DeFi raises questions about the long-term viability of crypto as a neutral medium. If blockchain infrastructure becomes synonymous with illicit activity, regulators may impose sweeping restrictions that stifle innovation. For example, the U.S. Treasury's recent emphasis on "reining in crypto anonymity" could lead to mandates for real-time transaction monitoring-a costly burden for smaller exchanges. Such measures would disproportionately affect platforms that lack the resources of industry giants like Coinbase or Binance, further consolidating power in the hands of a few.

Third, the ripple effects extend beyond crypto. Traditional asset classes are increasingly intertwined with digital infrastructure. Consider the rise of tokenized assets or cross-border payment systems that rely on blockchain. If regulators perceive these innovations as vectors for sanctions evasion, they could face sudden policy reversals or capital controls-risks that are not yet fully priced into markets.

A Call for Vigilance

For investors, the lesson is clear: the geopolitical risks of crypto infrastructure are no longer theoretical. The IRGC's evasion network demonstrates how state actors can exploit regulatory gaps to undermine global financial order. While blockchain's transparency is often touted as a defense against corruption, it also creates a paradox: the same technology that enables trustless transactions can be repurposed to facilitate distrustful ones.

Investors must now weigh these risks in their due diligence. This includes scrutinizing the jurisdictions of crypto platforms, assessing their compliance rigor, and monitoring geopolitical developments that could trigger regulatory overhauls. For traditional asset managers, the challenge is equally pressing-exposure to crypto-linked derivatives or fintech firms may carry hidden vulnerabilities if their underlying infrastructure is compromised.

As the IRGC's case shows, the future of finance is not just about code-it's about the hands that control it. And in a world where sanctions and counter-sanctions define economic warfare, the lines between innovation and subversion are blurring faster than ever.