Iran Proposes Maritime Insurance for Hormuz Strait Passage, Payable in Bitcoin

On May 11, Iran's Supreme National Security Council announced the establishment of the Persian Gulf Strait Authority (PGSA), tasked with monitoring operations in the Strait of Hormuz—through which 20% of the world's oil and gas flows during peacetime. The move is widely viewed as Tehran's latest step to formalize its control over this vital maritime artery.

Two days earlier, Iran's semi-official Fars news agency reported that Tehran would offer insurance to vessels passing through the Strait of Hormuz and the Persian Gulf, with payments made using cryptocurrencies such as Bitcoin. A website called "Hormuz Safe" is said to have already begun offering cargo insurance services. According to Fars, the program could generate over $10 billion per year for Iran.

Since the outbreak of the U.S.-Israel conflict with Iran on February 28, Iranian officials have repeatedly proposed imposing transit or security fees on vessels passing through the Strait of Hormuz. Tehran has acknowledged collecting fees from some commercial ships, with charges potentially reaching up to $2 million per voyage, according to a Bloomberg report. Many countries consider this a violation of the United Nations Convention on the Law of the Sea (UNCLOS), which bans levying any fees on vessels transiting international straits.

The new insurance program is seen as a different approach—rather than calling it a fee outright, Tehran presents it as a commercial risk management service combining safety assurance with financial protection. However, Dr. Abdul Khalique, Head of the Maritime Centre at Liverpool John Moores University, noted that Iran would face "serious financial, legal, and operational obstacles" if implemented. "Marine insurance requires substantial reserves and international reinsurance support to cover losses, while sanctions severely restrict Iran's access to global financial and insurance markets," he said. International maritime and port authorities could reject Iranian certifications, preventing vessels from calling at ports or securing loans.

Payments via Bitcoin also pose challenges. "Many governments associate cryptocurrency transactions with sanctions evasion and money laundering risks. Cybersecurity threats, limited global recognition, and geopolitical tensions in the Persian Gulf further undermine trust in the program," expert Khalique analyzed.

Since the war began, international marine insurers have sharply increased war risk premiums for vessels entering the Persian Gulf; some major firms like Gard, Skuld, NorthStandard, and American Club have even withdrawn coverage for the region. Some have later returned with government backing, such as Chubb joining a $20 billion maritime reinsurance program supported by the United States. Nevertheless, many shipping companies still avoid transiting the strait due to concerns over crew safety, risks of attack, or detention.

International reaction so far has been strongly negative. The U.S. State Department stated that no country is permitted to unilaterally impose fees on the right of transit through an international strait. China has also expressed opposition to any efforts restricting freedom of navigation. UN Secretary-General António Guterres called for the strait to remain open immediately, "free of tolls and discrimination." The United States has warned that companies paying Iran for passage through the strait could face sanctions.

According to analysts, acceptance of Iran's insurance plan, if any, would be "limited and highly selective." Some countries, such as China or smaller nations wary of Western sanctions, might consider it if it reduces costs or ensures passage. However, most major maritime powers and shipping companies are unlikely to participate. "Insurance is built on trust, enforceability, and internationally recognized legal standards. The vast majority of ports, banks, and shipowners rely on reputable insurers in London, Europe, or Asia," Khalique concluded.