The crypto market has become a new battleground in the Middle East, facing challenges in the digital asset market influenced by religion.

The geopolitical conflicts in the Middle East have spread to the crypto market.

On June 18, 2025, one of Iran's largest crypto exchanges suffered a severe cyber attack. A hacker group claiming to be pro-Israel breached the exchange's systems, stealing nearly $90 million in assets. The hacker group alleged that the exchange assisted in evading international sanctions and funding illegal activities, and that the stolen funds were transferred to accounts with political messages.

This shocking hacking incident not only exposed Iran's vast crypto market but also made people realize that this theocratic regime has also deeply engaged in the encryption industry.

Alternative financial channels under sanctions

Iran's interest in cryptocurrency primarily stems from economic and geopolitical pressures. Due to facing severe international sanctions, Iran's conventional financial channels are restricted, making international trade and fund transfers difficult. In this context, cryptocurrency is seen as an alternative means.

Analysis indicates that the country's economic situation has also driven the development of the crypto market. Iran has long faced high inflation and currency devaluation pressures, with its local currency continuing to weaken. The stock market has been highly volatile, prompting many to invest in cryptocurrencies to hedge against risks. For the general public, cryptocurrencies are seen as a tool for preserving value and diversifying assets, especially during times of economic turmoil.

According to an analysis report by a blockchain security company, the total amount of cryptocurrency flowing into major exchanges in Iran in 2022 was nearly $3 billion, with the exchange that was attacked by hackers being the largest platform in the country, holding a market share of about 87%. Other major platforms include Wallex, Excoino, and others. These local exchanges need to operate under the permission of regulatory authorities and comply with regulations such as anti-money laundering and customer identification.

In addition, Iran is reportedly collaborating with certain countries to launch a gold-backed cross-border stablecoin for trade settlements and to evade financial sanctions. There are also reports indicating that the Central Bank of Iran is studying the introduction of its own central bank digital currency and had planned to connect it with the clearing systems of other countries.

Thanks to its abundant energy resources, Iran recognized the cryptocurrency mining industry as a legal sector in 2018. By 2021, Iran accounted for approximately 4.5% of the global Bitcoin hash rate, producing nearly $1 billion worth of Bitcoin annually for import trade and to alleviate the impact of sanctions. The government implements preferential electricity pricing policies for cryptocurrency mining operations.

However, due to the burden on the power grid caused by high energy subsidies and regulatory requirements that miners must hand over the Bitcoin they mine to the central bank, many mining operations have chosen to go underground or operate in a circumvention manner. By 2024, Iran's share of global Bitcoin computing power has dropped to about 3.1%.

Policy Fluctuation: From Open to Tightening

The Iranian government's attitude towards cryptocurrency has undergone multiple changes, with regulatory policies showing a trajectory from early openness to gradual tightening.

Since 2018, Iran has officially recognized the digital asset mining industry as a legal industry. The government has introduced measures requiring licensed miners to use efficient equipment and only allows them to sell their mining proceeds to the central bank at a fixed price, while paying for electricity at export rates. The low electricity prices have attracted overseas miners, including those from China, to invest in mining in Iran.

However, this "energy exchange for currency" model quickly exacerbated the power shortage. In May 2021, after experiencing a rare summer blackout, the government announced a four-month temporary ban on all encryption mining activities to alleviate the load on the power grid. Since then, during the summer peak electricity usage, the government has temporarily closed some mining sites to ensure the supply of electricity for civilian use.

In terms of trading regulation, the Central Bank of Iran banned individuals from using foreign-mined digital assets for transactions within the country as early as 2020, strengthening control over the circulation of encryption currencies. After 2022, regulatory bodies tightened restrictions on crypto advertising and the sale of mining machines. In December 2024, officials ordered a ban on promoting crypto mining machines and related training courses online, and required major e-commerce platforms to remove related advertising content.

As we enter the end of 2024, regulatory focus shifts to crypto trading itself. The Central Bank of Iran has introduced new regulations aimed at blocking exchange transactions between cryptocurrencies and the local currency on domestic websites. In January 2025, it will launch a government-designated trading interface, requiring all domestic exchanges to connect to the regulatory system through this channel, facilitating the monitoring of user identity information and the flow of funds.

In February 2025, the Iranian government even announced a ban on publishing cryptocurrency advertisements in any occasion or platform. After a hacking incident in June, the Central Bank of Iran further strengthened its control over crypto transactions: it stipulated that domestic crypto platforms are only allowed to operate between 10 AM and 8 PM daily (the so-called "crypto trading curfew"), in order to improve regulatory efficiency and limit capital outflow. These restrictive measures reflect the authorities' considerations in balancing innovation promotion and financial security maintenance.

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) Religious Influence: Cryptocurrency and Islamic Doctrine

As an Islamic Republic, Iran must also consider the regulations of Islamic law while promoting the development of cryptocurrency. Islamic teachings prohibit all forms of usury and gambling, and cryptocurrency trading, due to its volatility and speculative nature, has been questioned by some conservatives.

The Supreme Leader of Iran holds a relatively open attitude towards this. In 2021, he explicitly stated that the buying, selling, and production of cryptocurrencies "must comply with the laws and regulations of the Islamic Republic of Iran" and are not automatically considered contrary to Islamic doctrine. In other words, as long as the government permits it, properly conducted digital asset transactions are not "illegal". Furthermore, the Supreme Leader has also called on the religious community to provide opinions on new social issues, including encryption, in order to keep religious law up to date.

However, the opinions of different religious scholars are not entirely consistent. Some prominent Shia scholars take a cautious stance, believing that cryptocurrencies like Bitcoin have "many uncertainties," such as a lack of government endorsement and the potential for misuse, and therefore their transactions do not comply with Islamic law requirements. Other religious leaders urge followers to adhere to the interpretations of more seasoned jurists in situations where the law is unclear.

Although the Iranian authorities do not explicitly regard cryptocurrency as a religious taboo, they emphasize that operations must be conducted within the framework of national laws and regulations to avoid excessive speculative behavior. This stance somewhat balances the conflict between Islamic doctrine and modern economic practices.

Amid multiple economic uncertainties, crypto assets continue to attract the attention of a large number of young people and tech professionals in Iran. With the development of information technology, the widespread use of smartphones, and the gradual opening up of external communications, the barrier for the general public to participate in digital currency trading is decreasing.

However, participating in the crypto market also comes with risks. The low level of encryption knowledge in Iran has set traps for criminals: fraud cases are rampant, and many investors have suffered huge losses due to blindly following trends. Anonymous transactions in the black market have also posed challenges for regulation. Coupled with the market's inherent volatility and the lack of mature legal protections, some Iranian families hold a cautious or even wait-and-see attitude towards such assets.

Overall, although cryptocurrencies are gradually being more widely accepted in Iran, discussions surrounding their legality, security, and morality are still ongoing. Nowadays, against the backdrop of the Iranian government significantly limiting internet access and even experiencing internet outages in several regions, for ordinary people, the prospects of the crypto market may have become irrelevant compared to the harsh realities of war and national survival.

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