Cyberwar, Sanctions, and a Hacked Exchange Trigger Iran's Crypto Exodus

Iran’s cryptocurrency market experienced a significant contraction in 2025, driven by geopolitical instability, a major cyberattack, and intensified sanctions enforcement, according to a report by TRM Labs. Total cryptocurrency flows involving Iranian entities between January and July 2025 fell to USD 3.7 billion, representing an 11% decline compared to the same period in 2024. The sharpest drop occurred after April, with inflows falling more than 50% year-over-year in June and declining by 76% in July. This downturn coincided with a breakdown in nuclear negotiations with Israel, a 12-day conflict with Israel beginning June 13, and widespread power outages caused by cyber and kinetic operations from Israel and internal government-led shutdowns [1].

Nobitex, Iran’s largest cryptocurrency exchange, remained a central hub for the country’s crypto activity, handling over 87% of all Iranian-linked transaction volume during the period. Of the USD 3 billion processed through the platform, approximately USD 2 billion flowed through the TRON network, primarily in TRC-20 USDT and TRX. This heavy concentration on a single platform and chain heightened systemic risk, which was further exposed by a USD 90 million hack on June 18. The breach, attributed to a pro-Israel group known as Predatory Sparrow, severely disrupted liquidity and transaction processing, pushing users toward alternative platforms [2].

The hack not only damaged user confidence in domestic exchanges but also revealed embedded surveillance features within Nobitex’s infrastructure. According to TRM Labs, the exchange provided authorities access to monitor ordinary users while ensuring VIP clients retained anonymity [3]. In the aftermath, outflows from Iranian cryptocurrency platforms surged by over 150% in the worst affected week, with many funds moving to global exchanges offering limited or no KYC checks. This trend underscored the ongoing reliance on crypto as a tool for capital flight and sanctions evasion, even amid heightened instability and regulatory pressure [1].

Tether’s largest-ever freeze of Iranian-linked wallets on July 2 exacerbated the situation. The stablecoin issuer blacklisted 42 addresses, many of which were connected to Nobitex and sanctioned entities, including those linked to the Islamic Revolutionary Guard Corps (IRGC). The freeze disrupted entrenched transaction patterns and accelerated a shift among Iranian users and exchanges toward alternative stablecoins, such as DAI on the Polygon network. This move allowed users to retain access to liquid stablecoins while avoiding future freezes [2].

Despite the overall decline in inflows, cryptocurrency remains a crucial mechanism for capital preservation and illicit procurement in Iran. The country continues to leverage digital assets to acquire sensitive goods from Chinese suppliers, including drone components, AI hardware, and other critical technologies. In addition, a thriving underground market for KYC bypass services has emerged, helping sanctioned users evade identity checks on global exchanges. Novin Verify, a prominent service, provides forged documents and step-by-step guides to facilitate access to foreign platforms, further enabling sanctions evasion [1].

In August 2025, Iran introduced a capital gains tax on cryptocurrency trading under the Law on Taxation of Speculation and Profiteering. The legislation, which positions crypto alongside assets like real estate and gold, marks the first time the government has imposed formal taxation on the sector. While implementation is expected to be phased in, the law signals a growing regulatory push to bring digital assets under official oversight [2]. However, TRM Labs noted that illicit activity at Iranian exchanges remains relatively low, accounting for only 0.9% of total volume — consistent with global averages [1].

Source: [1] Iran's Crypto Economy in 2025: Declining Volumes, Rising Tensions and Shifting Trust (https://www.trmlabs.com/resources/blog/irans-crypto-economy-in-2025-declining-volumes-rising-tensions-and-shifting-trust) [2] Iran crypto flows fall 11% on Israel conflict, Nobitex hack (https://cointelegraph.com/news/iran-crypto-flows-fall-israel-conflict-nobitex-hack) [3] Iran's Cryptocurrency Transactions Drop by 11% Over (https://forklog.com/en/irans-cryptocurrency-transactions-drop-by-11-over-seven-months/)