Crypto market becomes new battleground in covert U.S.-Iran conflict, casting shadow over cryptocurrency markets under theocratic regimes
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Crypto market becomes new battleground in covert U.S.-Iran conflict, casting shadow over cryptocurrency markets under theocratic regimes
Against the backdrop of the Iranian government's widespread internet shutdowns, severe throttling, and even complete outages in multiple regions, ordinary citizens may no longer care about the development prospects of the cryptocurrency market, as more pressing concerns such as war and national survival take precedence.
Navigating Web3 tides with focused insightsBy Zen, PANews
The conflict between Iran and Israel has spilled into the cryptocurrency domain.
On June 18, 2025, Nobitex, Iran's largest cryptocurrency exchange, suffered a shocking cyberattack. A pro-Israel hacker group calling itself "Predatory Sparrow" breached Nobitex’s systems and "destructively" stole nearly $90 million in assets. The group claimed that Nobitex had assisted the Iranian government in circumventing international sanctions and funding "terrorism," transferring the stolen funds to accounts displaying anti-Iranian messages.
The hackers also posted a warning on X: "These cyberattacks are due to Nobitex becoming a critical tool for the Iranian regime to fund terrorism and violate sanctions. Cooperating with infrastructure that supports the Iranian regime's terrorism and sanction violations puts your assets at risk."
This alarming hacking incident not only exposed Iran's vast cryptocurrency market to public view but also highlighted how this country—currently the world's only fully established Islamic theocracy—has become deeply intertwined with the crypto industry.
Motivation: Financial Channels Under Sanctions
Iran’s cryptocurrency market has evolved over many years, driven primarily by economic and geopolitical pressures. Due to stringent sanctions imposed by the United States and other nations, Iran’s conventional financial channels are restricted, hindering international trade and capital transfers. In this context, cryptocurrencies have emerged as an alternative solution.
According to analysis by Arab Peninsula Report, the nation's economic conditions are another key driver behind the growth of its crypto market. Iran has long faced high inflation and currency depreciation, with its national currency, the rial, steadily weakening. Volatility in both domestic and U.S. financial markets has pushed many savers to invest in cryptocurrencies as a hedge against risk. For ordinary Iranians, digital currencies serve as tools for wealth preservation and asset diversification, especially during periods of economic instability.
Data from blockchain security firm TRM Labs shows that nearly $3 billion worth of cryptocurrency flowed into Iranian exchanges in 2022 alone. Nobitex, the platform targeted in the recent Israeli-linked cyberattack, dominates the domestic market with approximately 87% share. Other major platforms include Wallex, Excoino, Aban Tether, and Bit24. These local exchanges operate under regulatory oversight and must comply with anti-money laundering (AML) and know-your-customer (KYC) requirements.
Reuters previously reported that most domestic Iranian crypto transactions connect to global markets via Nobitex or similar platforms. According to blockchain analytics firm Chainalysis, Binance processed $8 billion worth of Iranian transactions between 2018 and the end of 2022, while Nobitex handled $7.8 billion during the same period. In a 2021 blog post, Nobitex even encouraged users to conduct anonymous transactions using Tron tokens to avoid “asset risks arising from sanctions.”
Beyond crypto assets, the Iranian government has made strategic moves in blockchain technology development. Two state-backed blockchain initiatives stand out: Kuknos and Borna. Launched in 2019 by four major Iranian banks—including Melli Bank and Pasargad Bank—alongside tech company Tosan, the Kuknos network features a native token called PayMon (PMN), used for interbank settlements. Around the same time, Iran’s central bank partnered with blockchain firm Areatak to develop the Borna platform, built on technologies like Hyperledger Fabric, providing a blockchain-based application framework for financial institutions. These efforts indicate official interest in leveraging blockchain to enhance efficiency and transparency within the financial system.
Additionally, reports suggest Iran and Russia are jointly planning to launch a gold-backed cross-border stablecoin for bilateral trade settlement and to bypass financial sanctions. There are also indications that Iran’s central bank is researching its own central bank digital currency (CBDC), dubbed the “crypto-rial,” which was reportedly intended to link with clearing systems in countries such as the UAE.
Leveraging its abundant energy resources, Iran officially recognized cryptocurrency mining as a legal industry in 2018, allowing it to regulate what had already become a widespread practice. By 2021, Iran accounted for about 4.5% of global Bitcoin hash rate, generating nearly $1 billion worth of Bitcoin annually—used for import financing and mitigating the impact of sanctions. The government supported this sector through subsidized electricity rates for licensed mining operations.
However, excessive energy subsidies led to grid strain, and regulations requiring miners to sell their mined Bitcoin to the central bank prompted many operators to go underground or bypass rules. The Arabian Gulf Business Insight (AGBI) estimates that by 2024, Iran’s share of global Bitcoin hash power had declined to around 3.1%.
Policy: From Openness to Tightening – Enforcing a Crypto Trading Curfew
The Iranian government’s stance toward cryptocurrencies has fluctuated significantly, evolving from initial openness to increasing restrictions.
Since 2018, Iran has formally recognized cryptocurrency mining as a legal industry to bring existing operations under regulation. Authorities introduced measures requiring licensed miners to use energy-efficient equipment, sell mined coins to the central bank at fixed prices, and pay industrial electricity rates based on export tariffs. Low electricity costs attracted foreign investors, including Chinese miners, to set up operations in Iran.
The short-lived rise of the "Roadside Mining Pool"—briefly ranking among the world’s top five in hash power in 2020—epitomized Chinese miners seeking opportunity in Iran. In an exclusive interview with PANews, partners of the pool revealed how they, originally engaged in Iran-China shipping logistics, acquired thousands of mining rigs from stranded Chinese miners at scrap prices and leveraged local connections to establish Iran’s largest compliant mining facility.
Yet this "energy-for-coins" model quickly exacerbated electricity shortages. In May 2021, following rare summer-wide blackouts, President Hassan Rouhani announced a four-month temporary ban on all cryptocurrency mining activities, lasting until late September that year, to alleviate pressure on the national grid. Official data showed licensed mines consumed about 300 million kWh, while unlicensed illegal operations devoured up to 2 billion kWh—severely impacting civilian power supply. Since then, authorities have periodically shut down部分 mining sites during peak summer demand to ensure residential electricity availability.
On the transaction side, Iran’s central bank prohibited individuals from using foreign-mined cryptocurrencies domestically as early as 2020, tightening control over crypto circulation. After 2022, regulators intensified restrictions on crypto-related advertising and mining hardware sales. In December 2024, the government banned online promotion of mining equipment and related training courses, ordering major e-commerce platforms to remove relevant ads. That same month, energy authorities announced legal accountability for unauthorized mining activities.
These policies further stipulate that compliant mining farms can only operate when sufficient power is available, restricting operations outside off-peak hours. As electricity consumption and security issues stemming from widespread mining became more pronounced, the government imposed stricter controls on the mining sector. By late 2024, regulatory focus shifted directly to crypto trading. In December 2024, Iran’s central bank issued new rules aiming to block direct conversion between cryptocurrencies and rials on domestic websites. In January 2025, it rolled out a government-mandated API interface, requiring all domestic exchanges to integrate with the regulatory system to monitor user identities and fund flows.
In February 2025, officials went further, banning the publication of cryptocurrency advertisements across all platforms. Immediately after the June 2025 Nobitex hack, the central bank tightened controls even more: according to Chainalysis, the Iranian government now mandates that domestic crypto platforms operate only between 10:00 and 20:00 daily—a so-called “crypto trading curfew”—to improve oversight and curb capital flight. The constant emergence of restrictive measures reflects, to some extent, the government’s attempt to balance innovation promotion with financial stability and national security.
Interpretation: Cryptocurrencies and Islamic Doctrine
As an Islamic Republic, Iran must consider compliance with Sharia law when advancing cryptocurrency adoption. Islamic doctrine strictly prohibits usury (Riba) and gambling (Gharar). Given the volatile and speculative nature of crypto trading, some conservative clerics have expressed skepticism.
Supreme Leader Ayatollah Ali Khamenei holds a relatively open position. In 2021, he stated clearly that buying and producing cryptocurrencies is “subject to the laws and regulations of the Islamic Republic of Iran” and does not automatically constitute a violation of Islamic principles. In other words, if permitted by the state and conducted within legal frameworks, cryptocurrency transactions are not inherently “haram” (forbidden). Khamenei has also urged religious scholars to address emerging societal issues like cryptocurrencies to keep Islamic jurisprudence relevant in modern times.
Nonetheless, opinions among clerics vary. Prominent Shia scholar Grand Ayatollah Makarem Shirazi maintains a cautious stance, arguing that cryptocurrencies like Bitcoin involve “significant uncertainties,” including lack of governmental backing and susceptibility to abuse, thus failing to meet Islamic legal standards. Other clerics, such as Sistani, advise followers to defer to senior jurists’ interpretations when legal clarity is absent.
While the Iranian state has not declared cryptocurrencies explicitly forbidden under religion, it emphasizes that all activities must occur within nationally approved legal and regulatory boundaries, discouraging excessive speculation. This approach helps reconcile tensions between Islamic teachings and contemporary economic practices.
Amid ongoing economic uncertainty, digital assets continue to attract significant attention from young Iranians and tech professionals. Analysis by China Central Television (CCTV) suggests that advances in information technology, smartphone penetration, and gradually opening external communications have lowered barriers to entry for ordinary citizens participating in cryptocurrency markets.
A notable example occurred in summer 2024, when the Telegram-based clicker game “Hamster Kombat” went viral in Iran, sparking backlash from officials. Hossein Delirian, spokesperson for Iran’s National Cyberspace Center, issued a warning after observing extensive discussions among Iranian users in large Telegram groups, stating that using games for cryptocurrency mining had become fertile ground for cybercrime.
The controversy drew religious scrutiny as well. Renowned Shia scholar Ayatollah Nasser Makarem Shirazi described cryptocurrencies as “a source of many harms” and urged people to avoid games like Hamster Kombat involving Bitcoin.
Participation in crypto markets also carries risks. Arab Peninsula Report highlights how low levels of crypto literacy leave Iranians vulnerable to scams. Fraud cases are rampant, and numerous investors suffer heavy losses due to blind speculation. Anonymous black-market transactions pose additional regulatory challenges. Combined with extreme market volatility and inadequate legal protections, these factors lead many Iranian families to remain cautious or hesitant toward such assets.
Overall, while cryptocurrencies are gaining broader acceptance in Iran, debates surrounding their legality, safety, and ethical implications persist. Today, amid widespread internet shutdowns, throttling, and regional connectivity disruptions, for most ordinary Iranians facing real existential crises brought on by war and national instability, the future of the crypto market may no longer be a pressing concern.
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