US and Iran in a Crypto Cat-and-Mouse Game Over Sanctions

Just 12 hours before the US and Israel launched strikes on Iran in late February, Firouz, a cryptocurrency user in Tehran, decided to act. "I had felt all week that war was about to start," he said.

Trusting his instinct, he moved all his crypto savings off Nobitex—Iran's largest digital asset platform and the center of the crypto ecosystem in this sanctioned nation—to a personal digital wallet. "My main thought was that I could lose real ownership of any funds left inside an Iranian crypto service linked to or monitored by the state if war broke out, be it due to government action or as a consequence of cyber attacks," he said.

According to crypto transaction monitoring firm Chainalysis, Iran's cryptocurrency ecosystem was valued at over $7.78 billion last year, growing faster than in 2024. But data shows it is not just private citizens using crypto to mitigate the impact of runaway inflation and a collapsing national currency.

Iran's Islamic Revolutionary Guard Corps (IRGC) accounted for about 50% of on-chain activity in Q4, reflecting its dominance of the country's economy. Harder to track and easier to move than traditional bank payments, crypto offers a way to sell oil, buy weapons and goods, and dodge sanctions. It is also used to pay for imports.

But Iran's turn to crypto has also sparked a new chase with the US, as Washington tries to choke off Tehran's already limited economic options due to decades of sanctions.

'Targeting every financial channel'

In early April, the Iranian administration said it would require oil tankers seeking to pass through the Strait of Hormuz to pay fees in cryptocurrency. There have been reports of Iran receiving some crypto payments for vessels transiting the strait.

"Heavily sanctioned jurisdictions naturally gravitate toward crypto because it offers an alternative channel that provides access to finance they are restricted from due to sanctions," said Kaitlin Martin, senior intelligence analyst at Chainalysis. The estimate that the IRGC holds about half of crypto activity may only reflect a fraction of the true extent of state-controlled wallets, as many wallets have not yet been identified by regulators, Martin said.

But earlier this week, the US announced sanctions on a network of crypto wallets linked to Iran, freezing $344 million in digital assets, as the Trump administration tries to escalate economic pressure on Iran amid talks to end the war. "We will track the funds Tehran is desperately trying to move overseas and target every financial channel linked to the regime," US Treasury Secretary Scott Bessent wrote on X.

Iran's economy has operated under heavy sanctions for decades, cutting Iranians off from the international financial system. This has helped create a vibrant domestic crypto ecosystem, used as an alternative channel to bypass economic restrictions.

For Iranians—most of whom are blocked from the international financial system due to US sanctions—crypto offers a way to hold and preserve the value of their salaries and savings. Keeping income and savings in the state-controlled financial system risks losing hard-earned money to runaway inflation and the collapse of the rial, which has lost about 90% of its value since 2018.

But over the years, navigating the crypto sector has become harder for ordinary Iranians as IRGC-linked entities have taken over crypto mining operations, pushed others out, and used crypto to evade sanctions.

"By using subsidized electricity, the IRGC engages in crypto mining and effectively converts energy into untouchable money," said a Tehran-based crypto and blockchain researcher, adding that state-linked ransomware operations are also used to generate revenue.

Against this backdrop, US enforcement agency OFAC has labeled the entire Iranian crypto ecosystem as high-risk.

"As a result, ordinary people's connections with international businesses and the crypto community are almost completely severed. Major exchanges freeze Iranian accounts, foreign firms avoid cooperating with domestic partners, and well-known experts with relevant knowledge are unwilling to share that knowledge with Iranians," the source said. "This is the price ordinary people are forced to pay."

On top of that, internet cuts—since the war began, the Iranian government has imposed strict internet restrictions—lack of trust in state-linked entities, and cyber attacks have made crypto trading even more difficult.

What happens when war breaks out?

Yet two years of successive shocks, including two wars and nationwide protests, have led to a surge in crypto activity. Between February 28—when the joint US-Israel strikes on Iran began—and March 2, crypto monitoring groups detected about $10.3 million in crypto outflows, a separate Chainalysis report said. Some of the digital wallets used in this spike were linked to the IRGC.

"Some wallets that withdrew funds during the spike have historical connections to wallets identified as belonging to the IRGC or services handling IRGC funds, suggesting that at least part of the activity following the strikes may represent movements of state funds from Iran," the report said.

Before Israel's 12-day war in June 2025, crypto crime monitoring group TRM Labs identified a more than 150% increase in outflows from Nobitex.

The platform has over 11 million users and allows Iranians to exchange rials for crypto, which can then be transferred to digital wallets. In practice, this makes it easy to move money out of Iran while bypassing some of the checks and oversight associated with the global banking system. Within minutes of the first US-Israel strike last June, outgoing transaction volumes from Nobitex surged 700%, blockchain analytics firm Elliptic said.

On June 18, $90 million in crypto assets stored in Nobitex were stolen in a cyber attack reportedly by the Israel-linked group Predatory Sparrow. The group destroyed the stolen crypto assets by sending them to a wallet with no known private key.

Highlighting the importance of crypto in Iran's economy, the Central Bank of Iran bought over $500 million USDT, a dollar-backed stablecoin, last year, according to a January report by Elliptic. The report indicated this points to "a sophisticated strategy to bypass the global banking system."

But the US is also trying to catch up. Before freezing hundreds of millions in crypto on Wednesday, OFAC in January sanctioned two UK-registered companies, Zedcex and Zedxion, which operated as unauthorized cryptocurrency exchanges. They were accused of being involved in facilitating financial activities that allow Iran to evade sanctions, Elliptic said.

According to Martin, we will see more actions as public sector regulators in the US and other countries "begin to understand" that crypto is being used "on a large scale."