How the US and Iran are Engaged in a Crypto Cat-and-Mouse Game Over Sanctions
As tensions between the United States, Israel, and Iran escalate amid ongoing conflict, a new front has emerged in the battle over economic control and sanctions: cryptocurrency. Iranian authorities and everyday citizens are increasingly turning to digital currencies to circumvent crippling sanctions, while the US scrambled to respond to this evolving financial battleground.
Iran’s Growing Crypto Ecosystem
According to crypto transaction monitoring firm Chainalysis, Iran’s cryptocurrency ecosystem exceeded a valuation of $7.78 billion last year, marking a faster rate of growth compared to the previous year. This surge is not solely driven by private individuals seeking to protect their assets from rampant inflation and a collapsing rial, which has lost about 90 percent of its value since 2018. Rather, institutional actors tied to the state economy play a substantial role.
The Islamic Revolutionary Guard Corps (IRGC) is estimated to account for approximately 50 percent of on-chain cryptocurrency activity in the fourth quarter of last year. Their extensive involvement reflects the broad penetration of the IRGC within Iran’s economic landscape. Cryptocurrencies offer a relatively untraceable and swift means to facilitate transactions that evade traditional financial restrictions, including sales of oil, acquisition of weapons, and importing goods — all avenues heavily sanctioned by the international community.
Crypto as a Tool to Bypass Sanctions and Fund Activities
Amid ongoing economic pressure, Iran’s government has taken unconventional steps utilizing the crypto sector. In early April 2026, Iranian officials declared they would demand toll payments in cryptocurrency from oil ships passing through the strategic Strait of Hormuz—a critical chokepoint in global energy supply. Reports indicate that Iran has already received several such payments in digital currencies, illustrating how crypto is becoming a functional replacement for restricted international finance channels.
“This trend is typical for heavily sanctioned regions,” explained Kaitlin Martin, a senior analyst at Chainalysis. “Cryptocurrency provides alternative pathways to access finance when traditional banking systems are closed off.”
However, the IRGC has aggressively consolidated control over the previously more democratic Iranian crypto sphere. By dominating crypto mining operations—partly enabled by subsidized electricity—the IRGC effectively converts cheap energy into non-sanctionable digital assets. Additionally, certain state-linked ransomware schemes reportedly generate further cryptocurrency revenue.
The US Responds with Sanctions and Freezes
Recognizing the increasing use of cryptocurrencies by Iran to sidestep sanctions, US authorities have stepped up financial enforcement measures. In early 2026, the US Treasury’s Office of Foreign Assets Control (OFAC) froze $344 million in digital assets linked to Iran-related wallets, aiming to choke off Tehran’s financial lifelines amid war negotiations.
“We will follow the money that Tehran is desperately attempting to move outside of the country and target all financial lifelines tied to the regime,” declared US Treasury Secretary Scott Bessent on social media.
The US and its allies have also cracked down on third-party facilitators. For example, in January, OFAC sanctioned two UK-registered companies accused of operating unauthorized crypto exchanges that facilitated Iran’s evasion of sanctions.
Despite these efforts, the US has found it challenging to disrupt Iran’s expanding and sophisticated use of crypto, especially as Iran’s Central Bank purchased more than $500 million worth of USDT—a US dollar-backed stablecoin—in 2025, reflecting Beijing’s strategic maneuvering to bypass global banking restraints.
Cyberattacks and Crypto Volatility Amid Conflict
The crypto battlefield is not limited to economic measures alone. Cyberattacks have also played a significant role in this ongoing conflict. Just minutes after a joint US-Israel strike on Iran in late February 2026, crypto transaction volumes surged dramatically as users moved funds to evade potential seizures or disruptions.
Prior to Israel’s 12-day conflict in June 2025, crypto exchanges like Nobitex—the largest digital asset platform in Iran with over 11 million users—recorded a spike of over 150 percent in outflows. Following the attacks, outgoing transactions soared by 700 percent.
On June 18, 2025, Nobitex suffered a major cyberattack, widely attributed to the Israel-linked hacking group Predatory Sparrow. Approximately $90 million in cryptoassets were stolen and then destroyed by being sent to wallets with no known private keys, effectively erasing the assets.
Challenges for Ordinary Iranians
While Iran’s government and military entities benefit from crypto’s financial flexibility, ordinary Iranians face increasing obstacles. The OFAC’s designation of Iran’s entire crypto ecosystem as “high-risk” has caused major exchanges around the world to freeze Iranian accounts and avoid partnerships with Iranian entities. This isolation has left many Iranians cut off from international crypto communities and services.
Moreover, strict internet shutdowns imposed by Iranian authorities since the onset of war, combined with mistrust of state-controlled platforms and ongoing cyber threats, have made it difficult for average citizens to engage safely and effectively in the crypto market.
The Ongoing Game of Financial Evasion and Enforcement
The dynamic between Iran’s use of cryptocurrencies to evade sanctions and the US-led global efforts to restrict these methods is evolving rapidly. Analysts predict further US enforcement actions as regulators gain a clearer understanding of Iran’s growing crypto activities.
“This is an escalating cat-and-mouse game,” noted Kaitlin Martin. “As public sector authorities worldwide realize the scale at which cryptocurrencies are used to circumvent sanctions, we can expect more targeted sanctions and enforcement actions in the near future.”
As the conflict between the US, Israel, and Iran continues on multiple fronts, the cryptocurrency domain has emerged as a critical economic and strategic theater—a digital battleground emblematic of the new era of warfare and finance.
Reporting by Virginia Pietromarchi for Al Jazeera, April 29, 2026