Stablecoins as Dual-Use Assets: Tether's Role in Venezuela and Iran

Stablecoins, particularly Tether's USDT, have emerged as a double-edged sword in the global financial landscape. While they offer a lifeline for economic stability in hyperinflationary environments like Venezuela and Iran, they also enable sanctioned regimes to circumvent international financial systems. This duality presents both risks and opportunities for investors, policymakers, and the broader crypto ecosystem.

Venezuela: A Case Study in Sanctions Evasion and Economic Survival

Venezuela's economic collapse, marked by hyperinflation and a collapsing bolívar, has driven the country to adopt USDT as a de facto currency. State-owned oil company PDVSA now requires clients to use digital wallets and pay in USDT for oil deals, effectively bypassing U.S. sanctions on its central bank and oil sector according to Atlantic Council analysis. This strategy mirrors broader trends in sanctioned economies, where stablecoins facilitate cross-border transactions while evading traditional banking oversight.

The scale of this activity is staggering. By 2025, stablecoins accounted for 84% of illicit crypto transactions, with USDT dominating due to its dollar peg and ease of use as reported by CrowdFund Insider. Tether itself has responded by freezing 41 wallets in 2024 linked to sanctions evasion according to Atlantic Council analysis, underscoring the tension between utility and compliance. For ordinary Venezuelans, however, USDT serves as a critical tool for wealth preservation, remittances, and daily transactions. Over 38% of crypto site visits from Venezuela are directed toward peer-to-peer (P2P) platforms, highlighting the reliance on decentralized systems in the absence of functional banking infrastructure according to Radom Insights.

Iran: Crypto as a Weapon and a Lifeline

Iran's use of stablecoins is even more brazen. The Islamic Revolutionary Guard Corps (IRGC) leveraged UK-registered exchanges like Zedcex and Zedxion to move $1 billion in USDT between 2023 and 2025, bypassing Western sanctions as reported by Finance Magnates. In 2025, Iran's Ministry of Defence Export Center (Mindex) announced its willingness to accept USDT for advanced weapons, including ballistic missiles and drones according to The Block. This move not only challenges global sanctions but also normalizes crypto as a medium for state-sponsored arms trade.

Yet, for ordinary Iranians, stablecoins provide a hedge against the devaluing rial and a means to send remittances. During the 2025 Israel-Iran tensions, capital flight from exchanges like Nobitex surged by 150%, as citizens sought to protect their assets according to Trmlabs data. Despite this, the Iranian government imposed a capital gains tax on crypto trading and capped stablecoin holdings at $5,000 annually, aiming to curb capital flight but likely pushing activity underground according to Iran International.

Regulatory Responses: A Global Tightrope

The U.S. and EU have taken steps to address these challenges. The 2025 GENIUS Act established a federal regulatory framework for stablecoins, setting an international benchmark according to Chainalysis. Meanwhile, the EU's MiCA Regulation prioritizes compliant tokens, indirectly marginalizing non-compliant stablecoins according to Chainalysis. However, enforcement remains fraught. Tether's 2025 freeze of 42 Iranian-linked wallets, many tied to the IRGC, highlights the difficulty of policing decentralized systems according to Trmlabs analysis.

For investors, the dual-use nature of stablecoins presents a paradox. On one hand, they enable financial inclusion and economic resilience in crisis-hit nations. On the other, they empower sanctioned regimes to sustain illicit activities. The key lies in balancing innovation with accountability.

Conclusion: Navigating the Dual-Use Dilemma

Stablecoins like USDT are reshaping the global financial order, but their adoption in Venezuela and Iran underscores the need for nuanced regulation. While they offer critical tools for economic survival in sanctioned economies, their misuse for sanctions evasion and illicit trade cannot be ignored. Investors must weigh the long-term potential of stablecoins against the geopolitical risks they entail. As regulatory frameworks evolve, the crypto industry's ability to innovate responsibly will determine whether stablecoins become a force for good-or a tool for chaos.