Iran Uses Bitcoin and USDT to Evade US Sanctions
The Financial Times reports that Iran is using cryptocurrencies like Bitcoin and USDT to circumvent US sanctions. The US Treasury's Office of Foreign Assets Control (OFAC) has recently classified digital assets as a "sanctionable sector" in Iran's economy, highlighting that Tehran authorities are increasingly using cryptocurrencies as tools to evade sanctions.
According to on-chain analytics firms, Iran's crypto ecosystem exceeded $7.8 billion last year, with addresses linked to the Islamic Revolutionary Guard Corps (IRGC) accounting for about half of the on-chain activity in the fourth quarter. Additionally, it is estimated that by 2025, Iran's outflow of crypto funds will reach $4.18 billion, a 70% year-on-year increase, with $3.84 billion circulating through the local exchange Nobitex since 2019.
Blockchain analytics firm Elliptic revealed that Iran's central bank was tracked through two leaked documents to have purchased a total of $507 million in USDT, aimed at intervening in the exchange rate and supporting the rial, which has depreciated nearly 90% due to sanctions and inflation. Researchers believe that the Iranian central bank is effectively building a "sanction-resistant" funding system using USDT as an "offshore dollar account," with most funds flowing to the local exchange Nobitex.
This year, the US has taken multiple actions: In April, Operation Economic Fury froze $344 million in USDT from an Iran-linked Tron wallet; in June, the Treasury sanctioned four major Iranian exchanges—Nobitex, Wallex, Bitpin, and Ramzinex (with Nobitex accounting for about half of Iran's crypto trading volume and claiming 11 million users)—and added two executives from the exchange to the sanctions list; in July, OFAC updated its sanctions list against the Iranian central bank, adding four crypto addresses involving $165 million in stablecoins, of which $131 million was frozen by issuer Tether; on August 24, US Treasury Secretary Yellen announced that digital assets would be classified as a sanctionable sector, alongside sanctions against a Ukrainian intermediary suspected of processing over $100 million in crypto oil payments for the IRGC's Quds Force.
In addition to evading sanctions to purchase oil, weapons, and commodities, Iran has also been reported to use cryptocurrencies to charge tolls for ships passing through the Strait of Hormuz. The IRGC relies on subsidized electricity prices for cryptocurrency mining, described by researchers as "directly converting energy into hard-to-sanction currency."
Behind this is a continuous on-chain "cat-and-mouse game": on one hand, Iran attempts to turn stablecoins into an alternative channel to bypass the SWIFT and dollar settlement systems, directing funds to local exchanges and decentralized protocols, and cross-chain bridges to avoid the risk of frozen assets; on the other hand, the US, leveraging Tether's ability to freeze address funds upon law enforcement requests and the tracking capabilities of on-chain analytics firms like Chainalysis and Elliptic, continues to impose precise sanctions and asset freezes on the Iranian central bank, exchanges, and associated intermediaries—this year alone, the US has frozen or seized over $1 billion in related crypto assets. The beneficiaries are the US regulatory and compliance systems that control on-chain tracing and stablecoin freezing authority, while the pressured parties are the Iranian government's associated funding channels and the small to medium exchanges and intermediaries caught in the crossfire, facing risks of being frozen or added to the sanctions list.
Source: Public Information
ABAB AI Insight
Iran's evasion of sanctions did not start with cryptocurrencies—over the past decades, Tehran has long relied on a "shadow fleet" to bypass oil embargoes, using currency exchange networks through Dubai and Turkey (commonly known as "Hawala" underground banks) to transfer funds, and substituting gold and physical barter for dollar settlements to evade SWIFT system tracking. The addition of cryptocurrencies essentially migrates this long-standing evasion method from traditional financial channels to on-chain.
The operation path revealed for the Iranian central bank is quite representative—accumulating USDT through over-the-counter channels, treating stablecoins as "offshore accounts" to evade monitoring of the dollar settlement system, and then directing funds to the local exchange Nobitex to complete exchanges with the rial or other assets for currency intervention. Meanwhile, the IRGC relies on subsidized electricity prices for mining, directly converting energy into on-chain assets, bypassing traditional oil export settlement processes. The commonality of these two paths is to minimize the touchpoints of funds with banks and settlement systems regulated by the US.
This is highly similar to North Korea's previous actions of stealing exchange assets through hacker organizations and some Russian financial institutions turning to ruble stablecoins and friendly country settlement networks to evade SWIFT sanctions after 2022—both are state actors excluded from the traditional dollar settlement system, turning to crypto assets as alternative cross-border settlement tools; even the Iranian central bank's related wallets have been found to be linked to approximately $1.5 billion stolen by North Korean hackers from Bybit, indicating that these "sanctioned countries' on-chain networks" have begun to intersect and overlap. Currently, this game remains in a phase of "on-chain evasion method iteration and law enforcement adding new sanction tools," with neither side achieving a decisive advantage.
This tug-of-war essentially represents a regulatory shift—the focus of US regulation is expanding from traditional banks and the SWIFT settlement system to the stablecoin issuers themselves: since the issuance and reserves of mainstream stablecoins like USDT are highly concentrated in a few institutions under US jurisdiction, OFAC can require issuers to directly freeze specific address funds (such as Tether freezing $131 million in an Iranian central bank-related wallet at once), which extends the enforcement radius of dollar extraterritoriality from the banking account system into the realm of crypto assets, which were originally considered "decentralized and difficult to freeze," prompting sanctioned parties to further turn to decentralized protocols and cross-chain bridges as asset forms that are harder to freeze, with the game continuing to evolve.
ABAB News · Cognitive Laws
- As long as there is a centralized issuer, there are no truly unfreezable assets.
- The boundaries of sanctions are always pushed out step by step by those who evade them.
- Money converted from energy is always harder to seize than money in bank accounts.