First-Time Sanctions on Crypto Exchanges: A Flow Analysis of the Iran Crackdown

The U.S. Treasury Department has sanctioned two UK-based crypto exchanges, Zedcex and Zedxion, for the first time under Iran-specific financial sanctions. This action freezes all their U.S.-linked assets and prohibits American individuals and entities from engaging with them, marking a significant escalation in crypto-related financial enforcement.

The illicit flow processed through these platforms was massive. Together, they have handled over $94 billion in transactions since their registration in 2022. Of that volume, approximately $1 billion is linked to the Islamic Revolutionary Guard Corps (IRGC), representing roughly 56% of their total transaction flow. This share peaked at 87% in 2024, indicating a high concentration of sanctioned activity.

The key financial actor behind the network is Iranian financier Babak Zanjani. He is directly linked to the corporate trail behind Zedcex and was previously sentenced to death for embezzling billions from Iran's National Oil Company. The exchanges appear to function as a single entity, using lightly-regulated UK corporate structures to obscure control and support a well-established state-aligned financial network adapting to new rails.

The Iranian Crypto Ecosystem: Context and Resilience

The sanctioned exchanges operate within a vast and growing Iranian crypto ecosystem. The total value of this market was over $7.78 billion in 2025, having expanded at a faster pace than the previous year. This growth is not isolated; it is deeply intertwined with the country's economic and political turmoil.

The Islamic Revolutionary Guard Corps (IRGC) is the dominant financial actor within this system. Its on-chain activity represents approximately 50% of Iran's total crypto ecosystem in Q4 of 2025, a share that has steadily increased. This mirrors the IRGC's broader control over Iran's economy and provides a critical funding channel for its operations.

At the same time, the central bank is actively using crypto to manage its crisis. The Central Bank of Iran bought more than $500 million in dollar-backed digital assets last year to stabilize its collapsing currency and bypass U.S. sanctions. This official adoption, alongside the IRGC's illicit use, creates a dual-layered system where digital assets serve both state and non-state actors.

Market Impact and Forward Catalysts

The sanctions are a targeted enforcement action, not a broad market ban. This limits immediate systemic risk to the wider crypto ecosystem. The direct financial impact is confined to freezing all U.S.-linked assets of the two specific UK-based exchanges and cutting off American counterparties. The market's reaction will hinge on whether this sets a precedent for more aggressive targeting of crypto infrastructure used for sanctions evasion.

The key watchpoint is the broader regulatory signal. This is the first time OFAC has blacklisted entire exchange entities under Iran-specific sanctions, shifting from targeting individual wallet addresses or tech providers. If this enforcement pattern continues, it could force a re-evaluation of compliance costs for exchanges serving high-risk jurisdictions, potentially leading to more cautious onboarding or higher fees.

The primary catalyst to monitor is any significant disruption in the flow of funds to Iranian exchanges or a shift in stablecoin usage by Iranian entities. The Central Bank of Iran's purchase of over $500 million in dollar-backed digital assets last year shows a critical reliance on stablecoins to bypass sanctions. Watch for changes in that transaction volume or a pivot to other assets if the sanctioned channels become less viable.