Bitcoin as a Hedge Against Currency Collapse in Geopolitical Turmoil

In times of economic collapse and geopolitical instability, traditional assets often falter, leaving investors and citizens alike to seek alternatives. The Iranian rial's catastrophic depreciation-losing 90% of its value since 2018 and trading at 1.5 million rials per U.S. dollar by January 2026-has underscored the urgent need for a reliable store of value.

Bitcoin, with its decentralized and censorship-resistant properties, has emerged as a critical tool for ordinary Iranians to preserve wealth amid hyperinflation and capital controls. However, the same technology has also enabled state actors, such as the Islamic Revolutionary Guard Corps (IRGC), to exploit crypto for sanctions evasion, complicating its role as a purely apolitical asset. This duality raises important questions for investors navigating the intersection of geopolitics, digital assets, and strategic asset allocation.

Iran's Rial Collapse and Bitcoin's Rise as a Store of Value

The Iranian rial's collapse, driven by U.S. sanctions, oil price volatility, and domestic mismanagement, has rendered the currency nearly worthless. Inflation rates between 40% and 50% have eroded savings, pushing citizens to adopt Bitcoin as a hedge against devaluation. According to Chainalysis, Bitcoin withdrawals to personal wallets surged during major protests and periods of unrest, particularly before a nationwide internet blackout in January 2026, suggesting that Iranians are leveraging Bitcoin as a financial escape valve. By 2025, total cryptocurrency flows involving Iranian entities reached $3.7 billion, with Bitcoin and TRON-based stablecoins like USDT dominating transaction volumes.

This adoption is not merely speculative. For many Iranians, Bitcoin represents a lifeline. As stated by Bloomberg, the rial's 95% collapse overnight in 2025 highlighted the currency's fragility, prompting a shift toward digital assets as a means to protect purchasing power. The Iranian government's response-internet blackouts, stablecoin purchase caps, and a 2025 capital gains tax on crypto trading- further illustrates the tension between state control and the decentralized nature of Bitcoin.

State-Sanctioned Crypto Use and Sanctions Evasion

While Bitcoin has empowered ordinary citizens, it has also become a tool for state-sanctioned actors to circumvent international sanctions. The IRGC, in particular, has leveraged the crypto ecosystem at an industrial scale, with IRGC-linked addresses receiving over $3 billion in on-chain value in 2025. This dual use of Bitcoin-as both a lifeline for individuals and a vehicle for illicit finance-complicates its narrative as a purely apolitical asset.

The regime's engagement with crypto is not limited to illicit activity. In 2025, Iran formalized its crypto sector with a capital gains tax on trading, signaling a strategic move to integrate digital assets into its economic framework. However, this formalization has not curbed the IRGC's dominance. Over 50% of all crypto value received in Iran during the final quarter of 2025 was linked to sanctioned actors, according to Chainalysis. This duality-where crypto serves both as a tool of resilience and a mechanism for state-sanctioned evasion-highlights the geopolitical risks inherent in investing in digital assets.

XRP and Alternative Blockchains in Geopolitical Tensions

Bitcoin is not the only cryptocurrency gaining traction in Iran. XRP, Ripple's native token, has also seen increased adoption amid U.S.-Iran tensions. In 2025, XRP surged alongside Bitcoin as investors sought alternatives to traditional assets, with a 5.4% increase in XRP trading reported in early 2026 amid renewed geopolitical volatility. The 2025 settlement between Ripple and the U.S. Securities and Exchange Commission (SEC) further bolstered institutional confidence in XRP, contributing to its renewed adoption in markets like Iran.

However, the Iranian crypto economy experienced a 11% decline in total flows by mid-2025 compared to 2024, attributed to a breakdown in nuclear negotiations, regional conflicts, and cyber disruptions. Despite this, XRP and other blockchains like TRON continued to play a role in facilitating remittances and capital flight, with TRON-based USDT dominating transaction volumes. This suggests that while Bitcoin remains the dominant store of value, alternative blockchains are carving out niche roles in crisis economies.

Investment Implications and Strategic Allocation

For investors, the Iranian case study offers critical insights into strategic asset allocation during economic crises. Bitcoin's surge in adoption during the rial's collapse validates its role as a hedge against currency devaluation, particularly in markets with weak institutional trust. However, the dual use of crypto by state actors necessitates a nuanced approach. Investors must weigh the geopolitical risks of exposure to jurisdictions where digital assets are weaponized for sanctions evasion.

Diversification across blockchains may offer a solution. While Bitcoin's scarcity and censorship resistance make it ideal for preserving value, alternative blockchains like XRP and TRON provide utility in cross-border transactions and remittances. The 2025 data shows that TRON-based USDT accounted for a significant portion of Iran's crypto activity, underscoring the importance of layering different blockchain ecosystems into a crisis-resilient portfolio.

Yet, volatility remains a challenge. The 2025 Nobitex hack, which exposed vulnerabilities in Iran's crypto infrastructure, highlights the risks of over-reliance on a single platform or blockchain. Investors should prioritize security and liquidity, favoring well-established blockchains with robust institutional support.

Conclusion

Bitcoin's adoption in Iran during the rial's collapse reaffirms its value as a hedge against currency devaluation and geopolitical instability. However, the coexistence of state-sanctioned crypto use for sanctions evasion complicates its role as a purely apolitical asset. For investors, the key lies in strategic diversification-leveraging Bitcoin's store-of-value properties while incorporating alternative blockchains like XRP and TRON for utility and liquidity. As geopolitical tensions persist, digital assets will remain a critical tool for both individuals and institutions navigating economic crises.