Iran's Crypto Economy Stumbles, but Sanctions Stay on Course

Iran's cryptocurrency market has faced significant challenges in 2025, with total flows into the country's crypto trading platforms declining by 11% year-to-date to $3.7 billion between January and July. The drop is attributed to geopolitical tensions with Israel, a major cyberattack on the country’s largest exchange, and a blacklisting of Iranian-linked addresses by a leading stablecoin issuer, according to TRM Labs [1]. The sharpest declines in inflows occurred in June and July, with the latter month recording a 76% drop compared to the same period in 2024 [2].

The June 2025 hack of Nobitex, which processes over 87% of Iran’s crypto transactions, significantly impacted the sector. The $90 million breach, attributed to pro-Israel group Predatory Sparrow, exposed vulnerabilities in the platform's security and led to a temporary loss of liquidity. This event coincided with a 12-day conflict between Iran and Israel and widespread power outages in Iran, further exacerbating market instability [1].

In response to the hack, Tether implemented its largest-ever freeze of Iranian-linked wallets, blocking 42 addresses with substantial exposure to Nobitex [2]. This action disrupted settlement patterns and pushed users toward alternative stablecoins such as DAI on the Polygon network, illustrating a broader trend of rapid adaptation in the face of enforcement measures. The incident also triggered a migration of capital to high-risk foreign exchanges with weak or no Know Your Customer (KYC) requirements [1].

Iran's reliance on cryptocurrency for economic and political objectives remains evident despite the setbacks. The country has continued to use crypto to procure sensitive goods, including drone components, artificial intelligence (AI) hardware, and other sanctioned materials from Chinese resellers. Additionally, TRM Labs has identified the use of crypto for espionage payments between Iran and foreign operatives, with three Israeli citizens arrested in August 2025 for alleged spying on Tehran’s behalf, compensated through digital assets [2].

Despite the decline in inflows, outbound flows have remained relatively stable, highlighting crypto’s role as a critical channel for capital flight. Even as domestic trust in virtual asset service providers (VASPs) has eroded, the system continues to enable Iran to circumvent sanctions and transfer value to sanctioned entities. Illicit transactions, however, represent just 0.9% of total volume, in line with global averages [2].

The Iranian government has also taken regulatory steps to further assert control over the sector. In August 2025, the country introduced a capital gains tax on cryptocurrency trading, a move that positions digital assets alongside gold, real estate, and forex for taxation purposes. This shift signals a broader effort to formalize oversight of the sector while also capturing revenue from a rapidly evolving asset class [2].

Source: [1] Iran crypto flows fall 11% on Israel conflict, Nobitex hack (https://cointelegraph.com/news/iran-crypto-flows-fall-israel-conflict-nobitex-hack) [2] 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)