Iran Used $2 Billion in Crypto to Run Its Militant Proxies in 2025

Global illicit crypto activity surged to a record $154 billion in 2025, driven largely by sanctioned nation-states seeking to evade financial restrictions according to Cointelegraph. This marked a 162% increase from 2024 and was fueled by the widespread use of stablecoins and other digital assets for cross-border transactions as reported by Yahoo Finance.

Iran played a central role in this illicit finance wave. The Islamic Revolutionary Guard Corps (IRGC) transacted more than $2 billion in cryptocurrency in 2025 to fund its militant proxies, including groups like Hezbollah, Hamas, and the Houthis according to Yahoo Finance. These transactions allowed the IRGC to circumvent Western sanctions while maintaining control over its global operations.

Stablecoins accounted for 84% of all illicit crypto transactions in 2025 according to Cointelegraph. This trend mirrored broader patterns in the legitimate crypto ecosystem, where stablecoins have grown in popularity due to their low volatility and ease of use for cross-border transfers as reported by Sky News.

Why Did This Happen?

Sanctions against sanctioned entities and nation-states pushed them to seek alternative financial systems according to Cointelegraph. As traditional banking channels became more restricted, illicit actors increasingly turned to cryptocurrencies for fund transfers and cash-outs. Russia, for example, launched its ruble-backed A7A5 token in February 2025, and by the end of the year, it had processed over $93.3 billion in transactions according to Crypto News.

The rise in illicit crypto activity was also supported by the proliferation of sophisticated on-chain techniques. Sanctioned entities used complex transaction structures to obscure the flow of funds, making it harder for regulators to track and intercept illicit transactions as reported by Yahoo Finance.

How Did Markets React?

While illicit crypto activity remains below 1% of total crypto transactions, the rapid growth in 2025 has raised concerns among regulators and market participants according to Crypto News. The expansion of the illicit on-chain ecosystem suggests that traditional enforcement mechanisms are struggling to keep pace with the speed and scale of digital financial innovation according to TradingView.

Blockchain analytics firms like Chainalysis are working to enhance their tools to detect and monitor illicit activity more effectively. However, as the number of sanctioned entities grows, so does the challenge of identifying and tracking illicit flows according to Cointelegraph.

What Are Analysts Watching Next?

Analysts are closely monitoring the evolution of stablecoins and the potential for further regulatory intervention. The popularity of Russia's A7A5 token and other sanctioned stablecoins highlights the need for updated frameworks to address the risks associated with cross-border digital currencies according to Cryptopolitan.

Regulators are also focusing on the role of decentralized finance (DeFi) protocols in enabling illicit transactions. These platforms provide a route for sanctioned actors to access liquidity and convert their funds into market-leading stablecoins like USDT without directly holding them as reported by Yahoo Finance.

Investors and market participants should watch for policy changes in major jurisdictions, particularly in the U.S. and the EU, which are expected to introduce new rules to address the risks posed by illicit crypto activity according to FXStreet.

The rise in illicit on-chain transactions underscores the growing importance of blockchain surveillance and regulatory compliance in the global financial system. As crypto continues to evolve, so too will the tools and strategies used to combat financial crime.