Iran's Digital Blackout: When Banks Shut Down, USDT Became the Only Liquid Currency
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Iran's Digital Blackout: When Banks Shut Down, USDT Became the Only Liquid Currency
Under geopolitical conflicts, cryptocurrencies may become a survival haven for ordinary people.
Navigating Web3 tides with focused insightsRecently, Iran has once again become a focal point of international attention. Against the backdrop of nationwide protests, the Iranian government implemented extensive internet and communication controls on the evening of January 8. During that night, Iran's external network connectivity dropped sharply within hours, with mobile data and fixed broadband services disrupted across most regions.
In this context, demand for alternative communication methods and non-traditional financial tools has risen simultaneously. On one hand, satellite internet services represented by Elon Musk’s Starlink have been used in localized areas to restore limited external connections. On the other hand, amid the persistent weakening of Iran’s national currency against major foreign currencies, crypto assets such as USDT have found use not only in daily life but also in military-related applications.
Meanwhile, escalating regional geopolitical tensions have further intensified pressure on Iran’s monetary system. The dollar-to-rial exchange rate in the free market has fallen to historic lows, signaling a deepening of Iran’s currency crisis. The following analysis by CoinW Research will focus on these developments.
I. The Starlink Battle: A Suppressed Digital Window
Starlink as a Fleeting Digital Lifeline
In the first few hours after the nationwide internet shutdown on January 8, this lifeline briefly reactivated. A small number of users who could still access the external internet via Starlink became crucial conduits for information dissemination. Iranians urgently uploaded on-site videos and text records, which were then shared through social media platforms like Telegram.
During this period, the number of Starlink users reached hundreds of thousands, widely dispersed across the country. With conventional communications completely paralyzed, Starlink emerged as a vital channel for transmitting information outward. Growing voices called upon Elon Musk to expand Starlink support for Iran. However, practical constraints remain clear—without sufficient ground terminals, satellite coverage remains unattainable.
Escalating Electronic Warfare: GPS Jamming and Crackdowns
Yet this fragile digital signal was quickly met with systematic suppression. Iranian military forces rapidly deployed military-grade electronic warfare equipment to conduct high-intensity, large-scale interference against Starlink satellite signals, causing a cliff-like decline in terminal connection stability.
Starlink’s operation heavily relies on GPS signals for satellite positioning and time synchronization. Iran repurposed its wartime anti-drone GPS jamming technology to suppress satellite internet access. On the first day of the blackout, Starlink experienced an average packet loss rate of 30%, reaching as high as 80% in some areas—rendering the service nearly unusable. Although such jamming cannot achieve absolute nationwide coverage, it was sufficient to silence Starlink on a broad scale for the first time in Iran.
Iranian authorities also launched coordinated legal and physical crackdowns. During the blackout, security forces intensified efforts to locate and seize satellite terminals. Drones were deployed to inspect rooftops, specifically searching for Starlink’s distinctive dish-shaped antennas. Areas suspected of hosting terminals faced targeted electromagnetic shielding, with strong noise signals overwhelming specific frequency bands.
Under such high-pressure conditions, individuals attempting to use Starlink resorted to extreme evasion tactics. Some employed multiple layers of VPNs to obscure their communication patterns, while others frequently moved antenna positions, minimized operating times, or went online only briefly during late-night hours.
The Iranian government is also preparing for long-term confrontation—on one hand implementing a whitelist internet access model, allowing only state-approved institutions limited connectivity; on the other accelerating development of a “National Intranet” system designed to permanently isolate the public from the global internet.
II. Cryptocurrencies: Safe Havens Amid Collapsing Local Currency
Internet blockades not only created an information vacuum but also swiftly impacted Iran’s already fragile financial system. With banking services intermittently disrupted, cash circulation restricted, and the rial continuing to depreciate, cryptocurrencies have become essential mediums of exchange—especially stablecoins like USDT.
Stablecoins such as USDT demonstrate a dual role within Iran’s economy. On one hand, they serve civilians seeking to hedge against inflation and mitigate uncertainties caused by financial restrictions. On the other, stablecoins are also used for military funding flows, enabling circumvention of sanctions in specific scenarios.
Civilian Use: Stablecoins as Hedging Instruments
From a civilian perspective, years of sustained rial depreciation have steadily eroded purchasing power. With limited access to foreign exchange and exclusion from international clearing systems, many citizens have gradually shifted savings from local currency to dollar-pegged stablecoins. Among them, USDT issued on the Tron network—due to its low fees, fast transfers, and high liquidity—has become particularly widespread in Iran. USDT is commonly used for inflation-resistant savings, over-the-counter (OTC) settlements, and even certain daily payment scenarios.
This trend intensified during periods of social instability and rising financial risk. Ahead of the December 2025 protest outbreak, large numbers of residents converted rials into USDT via OTC channels. In response, Iranian authorities tightened regulations, explicitly capping individual stablecoin holdings at the equivalent of $10,000 USD, with annual purchase limits not exceeding $5,000 USD.
Military and Sanctions Evasion: Cross-Border Settlement Functionality
Beyond civilian usage, stablecoins have also facilitated cross-border fund movements related to Iran’s defense industry and sanctioned entities. In 2025, Iranian defense export agencies publicly stated in promotional materials their acceptance of cryptocurrency payments—including for certain military products and equipment exports.
According to data from TRM Labs, since 2023, Iran's Islamic Revolutionary Guard Corps (IRGC) has used two UK-registered crypto exchanges, Zedcex and Zedxion, to transfer approximately $1 billion in funds—most of which involved USDT transactions primarily conducted on the Tron network. This highlights how stablecoins can serve as alternative settlement channels under sanction regimes.
Extreme Conditions: Testing the Limits of Decentralized Technology
Iran’s nationwide internet blackout severely constrained the immediate usability of cryptocurrencies, yet objectively accelerated exploration of their viability under extreme circumstances. Civilian communities began experimenting with various contingency solutions. Technically capable users relied on satellite links such as Starlink to maintain tenuous connections to blockchain networks. Even under highly unstable communication conditions, they retained limited ability to conduct crypto transactions.
Meanwhile, crypto assets—based on code-driven consensus—demonstrated remarkable resilience when physical infrastructure failed. In contrast, traditional banking systems are entirely dependent on physical infrastructure and administrative access. When bank systems go offline due to unrest, individuals—even if they regain internet access—cannot access funds held in centralized institutions. Crypto assets, however, transcend borders and blockades as long as there exists a functional chain-based exit route. They extend the boundaries of financial services into far broader domains.
III. Observations and Reflections on Digital Sovereignty
From Territorial Sovereignty to Private Key Sovereignty
Historically, states controlled citizens’ livelihoods by monopolizing banks and fiat currencies. Yet crises in Iran and Venezuela reveal that geographic borders may be losing absolute control over wealth. As long as individuals hold their private keys, their assets no longer depend on domestic bank solvency or national currency stability. This awakening of private key sovereignty represents the core value proposition of cryptocurrencies in zones of extreme turmoil.
Resilience and Stratification of Crypto Assets
Cryptocurrencies can help ordinary Iranian families preserve savings amid hyperinflation, while enabling sanctioned entities to continue accessing resources through encrypted networks. This dual nature underscores the resilience of digital assets—particularly fully decentralized ones like BTC, which reject any form of political filtering. They do not serve the powerful, nor belong exclusively to the vulnerable—they remain loyal only to algorithms. This cold neutrality is precisely why they gain global consensus in turbulent times.
However, under extreme political pressure and compliance scrutiny, different categories of crypto assets exhibit clear stratification. Centralized stablecoins like USDT offer advantages in price stability but contain embedded centralized control mechanisms at the contract level. This means issuers can freeze assets targeting specific addresses via external legal orders or regulatory pressure—indicating USDT remains exposed to risks of external interference.
In contrast, native crypto assets such as BTC and ETH—without a single controlling entity and possessing strong anti-censorship properties—enable permissionless, self-sovereign settlements. In survival struggles where traditional banking fails and centralized protocols falter, these algorithmically governed native assets may become the only reliable value anchors under extreme conditions—the final credit fallback beyond technological frontiers.
At the same time, the need for absolute censorship resistance has further driven industry exploration into privacy coins. By concealing transaction addresses and amounts, privacy coins aim to add informational anonymity atop algorithmic rigidity, countering increasingly sophisticated on-chain tracking and sanctions enforcement, thereby building deeper technical defense layers in extreme environments.
From Speculative to Survival Utility: The Evolution of Cryptocurrency
The cases of Iran and Venezuela send a clear signal: amid geopolitical conflicts, cryptocurrencies may become survival shelters for ordinary people. When fiat loses credibility and internet access is severed, the value of crypto is no longer defined by price appreciation—but by whether it can sustain individual survival. This shift—from speculative asset to survival tool—will prompt more economies on the edge of trust collapse to fundamentally embrace the crypto ecosystem, viewing it as a digital refuge for modern civilization under extreme repression.
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