Iran's Crypto Market Crumbles as Trust and Security Collide

Iranian cryptocurrency flows declined by 11% in the first seven months of 2025 compared to the same period in 2024, according to TRM Labs. Total cryptocurrency flows between January and July 2025 reached USD 3.7 billion, with the sharpest drops occurring in June and July. These declines coincided with a 12-day conflict between Iran and Israel starting June 13, a deterioration in nuclear negotiations, and widespread power outages attributed to Israeli cyber operations and regime-led internet shutdowns. The geopolitical instability and deteriorating trust in domestic platforms have had a compounding effect on the flow of funds, with inflows collapsing by over 76% in July alone.

Nobitex, Iran’s largest cryptocurrency exchange, remained a central figure in the market, handling over 87% of all Iranian-linked crypto transactions in 2025. However, confidence in the platform was severely damaged by the USD 90 million hack on June 18. The attack, attributed to the pro-Israel group Predatory Sparrow, disrupted liquidity and exposed significant weaknesses in the exchange’s security infrastructure. The breach also revealed embedded surveillance capabilities, raising concerns about user privacy and the regime’s access to financial data. Following the incident, outflows from the exchange surged by over 150% in one week, with many users redirecting their funds to high-risk foreign exchanges and platforms with weak or no KYC requirements [1].

The impact of the hack extended beyond liquidity concerns. TRM Labs noted that it accelerated a decline in trust in Iran’s virtual asset service providers (VASPs) and prompted users to seek alternative settlement channels. In response to the loss of confidence, Iranian exchanges, influencers, and state-backed channels encouraged users to move their TRON-based USDT balances to the DAI stablecoin on the Polygon network. This shift reflected a broader trend of rapid adaptation to enforcement actions and underscored the flexibility of both retail and institutional participants in navigating sanctions and operational disruptions [2].

Tether further complicated the situation on July 2, 2025, by freezing 42 Iranian-linked wallets in its largest-ever blacklisting operation. Many of these addresses were connected to Nobitex and IRGC-affiliated actors, according to TRM Labs. This move disrupted established transaction patterns and led to a diversification of settlement methods, mirroring past adaptations seen following the loss of traditional banking channels. Despite these disruptions, TRM Labs found that illicit activity at Iranian exchanges accounted for only 0.9% of total volume, which is in line with the global average as reported in the 2025 Crypto Crime Report [3].

In response to the growing volatility and pressure from international enforcement, Iran enacted the Law on Taxation of Speculation and Profiteering in August 2025. The law, which imposes capital gains tax on cryptocurrency trading, marks a significant regulatory shift. By classifying crypto alongside gold, real estate, and forex, the regime signals its intent to formally integrate and tax digital asset markets. This development suggests a broader strategy to bring crypto activity under state oversight while maintaining its utility for sanctioned procurement and geopolitical operations [4].

Despite these challenges, Iran continues to leverage cryptocurrency for political and economic objectives. The country is using digital assets to procure sensitive goods such as drone components, AI hardware, and other technologies from Chinese suppliers, bypassing international sanctions. Additionally, TRM Labs reported the first known instances of Iran using crypto for direct espionage payments to foreign operatives, highlighting the expanding role of digital assets in covert statecraft. These developments indicate that while public trust in domestic platforms is eroding, the regime is adapting to maintain control over critical economic and political functions [5].

Source:

[1] Iran's Crypto Economy in 2025: Declining Volumes, Rising Tensions (https://www.trmlabs.com/resources/blog/irans-crypto-economy-in-2025-declining-volumes-rising-tensions-and-shifting-trust)

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