A month before bombs fell on Iran, Reuters reported that the US Treasury was investigating whether crypto platforms had helped Iranian officials evade sanctions. When airstrikes began on February 28, that investigation got a live stress test — and the results were revealing.
The war did not break Iran’s crypto infrastructure — it proved how indispensable stablecoins have become to it.
Before the Strikes: A $10 Billion Shadow Economy
Reuters reported in early February that Iran’s crypto transaction volumes had hit an estimated $8–10 billion in 2025, citing TRM Labs and Chainalysis. Nobitex, Iran’s largest crypto exchange, alone serves roughly 15 million users. But the headline numbers masked a more significant development underneath.
UK-based analytics firm Elliptic told Reuters it had found that Iran’s Central Bank acquired at least $507 million in USDT last year — what it called a “sophisticated strategy to bypass the global banking system.” Chainalysis estimated that half of Iran’s crypto volumes were linked to the Islamic Revolutionary Guard Corps (IRGC). TRM put the figure lower at around 5%, but had still identified over 5,000 IRGC-connected wallet addresses that have moved $3 billion since 2023.
Separately, a TRM Labs report published in January revealed that two UK-registered companies, Zedcex and Zedxion, had funneled $619 million in stablecoins to wallets linked to the IRGC in 2024 alone — a 2,500% increase from the prior year.
“This is not opportunistic crypto misuse — it’s a sanctioned military organization operating exchange-branded infrastructure offshore,” TRM’s global head of policy Ari Redbord said.
What War Revealed
According to a TRM Labs analysis published shortly after the strikes, Iran’s internet connectivity dropped by roughly 99% when US-Israeli strikes hit on February 28. Crypto transaction volumes collapsed by 80% within days. Exchanges shifted into defensive mode — some suspended withdrawals entirely, others froze withdrawals in both crypto and rial (Iran’s national currency), and several moved to twice-daily batch processing.
But the most telling move came from Iran’s Central Bank, which directed exchanges to temporarily halt trading in the USDT-toman pair overnight. The toman, a commonly used denomination of the rial, serves as the primary bridge between crypto and fiat in Iran.
With panic driving Iranians to swap rials for dollar-pegged USDT, the pair was effectively becoming a real-time gauge of currency collapse. Halting it was the Central Bank’s attempt to slow that repricing — the crypto equivalent of shutting down a foreign exchange market during a crisis.
When trading resumed, order books were thin, and prices briefly dislocated — signs of a market struggling to function without its most critical pair. The episode underscored just how deeply USDT had embedded itself in Iran’s financial plumbing.
TRM’s overall assessment: “evidence of stress, not failure.” Iran’s crypto ecosystem shrank but did not break.
But TRM added a caveat: ordinary Iranians lost access when the internet went dark, but state-linked actors may not have. The overall drop in volume could be masking quieter moves by regime-connected players repositioning funds through whatever infrastructure remained online — something TRM said would “likely reveal itself in time” as transaction-level data is analyzed.
FATF Connects the Dots
Days after TRM published its findings, the Financial Action Task Force released a targeted report on stablecoins and unhosted wallets on March 3. The timing was notable.
The FATF report cited Chainalysis data showing stablecoins accounted for 84% of all illicit crypto transaction volume in 2025. It explicitly named Iranian actors leveraging stablecoins for proliferation financing and recommended that issuers adopt freeze, burn, and deny-listing capabilities.
With over 250 stablecoins in circulation and market capitalization exceeding $300 billion, the FATF urged countries to implement “proportionate and effective mitigating measures” — an acknowledgment that most jurisdictions have yet to build regulatory frameworks specifically addressing stablecoin risks.
The Paradox
Iran’s case exposes a fundamental tension in the stablecoin ecosystem. USDT’s dollar peg — the same feature that makes it useful for legitimate cross-border payments — also makes it the instrument of choice for sanctions evasion. Tether maintains a “zero-tolerance policy toward criminal use,” but as RUSI’s Tom Keatinge told Reuters in February: “The harder one squeezes the Iranian economy, the more one better be ready to deal with the consequences, one of which is the expanding use of crypto.”
The war did not create Iran’s dependence on stablecoins. It simply made it impossible to ignore.
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