Iran’s stablecoin lifeline survived the bombing

Reuters reported a month before the bombs fell on Iran With a report The US Treasury Department was investigating whether cryptocurrency platforms were helping Iranian officials evade sanctions. When the aerial bombardment began on February 28, this investigation received a live and practical test – and the results were revealing.

The war didn’t break Iran’s crypto infrastructure – it showed how essential stablecoins are to it.

Reuters reported At the beginning of February The volume of cryptocurrency transactions in Iran will reach an estimated $8-10 billion in 2025, according to TRM Labs and Chain Analysis. Nobitex, the largest cryptocurrency exchange in Iran, only serves about 15 million users. But these headline numbers hid a more important development beneath the surface.

British analytics firm Elliptic told Reuters it had found Iran’s central bank bought at least $507 million in USDT last year – calling it an “advanced strategy to circumvent the global banking system.” Chain Analysis estimated that half of Iran’s cryptocurrency volume is linked to the Islamic Revolutionary Guard Corps. As for TRM, it estimated the lower percentage at about 5%, but identified more than 5,000 wallet addresses linked to the Revolutionary Guard that transferred $3 billion since 2023.

View a report from TRM Labs Published in January Two UK-registered companies, ZedSex and ZedXion, sent $619 million in stablecoins to IRGC-linked wallets in 2024 alone – a 2,500% increase from the previous year.

Ari Redbord, head of global policy at TRM, said that this is not an opportunistic use of cryptocurrencies – but rather a sanctioned military organization that manages the infrastructure that bears the name of offshore exchanges.

What the war revealed

According to analysis by TRM Labs Published shortly after the strikesIran’s Internet connection went down by about 99% when the US-Israeli strikes hit on February 28. Cryptocurrency transaction volumes collapsed by 80% in a few days. Exchanges have gone into defensive mode – some have stopped withdrawals entirely, some have frozen withdrawals in cryptocurrencies or rials (Iran’s national currency), while others have switched to twice-daily batch processing.

But the most significant action came from the Central Bank of Iran, when it ordered exchanges to temporarily stop trading on the USDT-Toman pair overnight. The toman, a commonly used denomination of rial, serves as a major bridge between digital and fiat currencies in Iran.

Panicked Iranians rushed to exchange rials for USDT, which is tied to the dollar, and the pair became a real-time barometer of the currency’s collapse. The stop was an attempt by the central bank to slow down these new rates – the equivalent of closing the exchange market in the middle of the crisis in the world of digital currencies.

Resuming trading, he noticed that order books were thin, and that prices had temporarily decoupled – signs of a market struggling to function without its most important pair. This incident highlighted how integrated the USDT has become in Iran’s financial infrastructure.

TRM assessed the situation in general: “evidence of stress, not failure”. Iran’s encryption system has weakened but not collapsed.

But TRM added a caveat: ordinary Iranians lost access when the internet went down, but state-linked actors did not. The overall decrease in volume could mask quieter movements by players connected to the system reordering funds through remaining online infrastructure – TRM said this is “likely to reveal itself over time” as transaction data is analyzed.

The FATF connects the dots

TRM released its findings just days before the FATF released its findings Direct report Regarding stablecoins and non-hosted wallets on March 3. The importance of timing was noted.

The FATF report referred to Chainalysis data which said that Stablecoins represent 84% of the total volume of illicit cryptocurrency transactions In 2025. The report explicitly mentioned Iranian entities using stablecoins to finance proliferation and recommended that issuers adopt freeze-and-burn capabilities and block lists.

The number of stablecoins in circulation reached more than 250, the market capitalization exceeded $300 billion, and the FATF urged countries to implement “effective and proportionate mitigation measures” – an emphasis that most jurisdictions have not yet built a regulatory framework that specifically addresses stablecoin risks.

Irony

The case of Iran exposed a fundamental tension in the stablecoin system. USDT’s peg to the dollar—the same feature that makes it useful for legitimate cross-border payments—also makes it the preferred tool for circumventing sanctions. Tether maintains a “zero tolerance policy towards criminal use,” but Tom Keating of the RUSI Institute explained to Reuters in February: “The more pressure there is on the Iranian economy, the more prepared you have to be to deal with the consequences, and one of those consequences is the expansion of cryptocurrency use.”

The war did not create Iran’s dependence on stablecoins. Rather, it made it impossible to ignore.