A month before the bombs were dropped on Iran, Reuters reported that the US Treasury Department was investigating whether crypto platforms helped Iranian authorities evade sanctions. When the airstrikes began on February 28, the investigation conducted a live stress test, the results of which were revealed.
The war did not destroy Iran’s crypto infrastructure. This proved how essential stablecoins have become for Iran.
Before the strike: The $10 billion shadow economy
In early February, Reuters reported, citing TRM Labs and Chainalysis, that Iran’s cryptocurrency trading volume is estimated to reach $8 billion to $10 billion by 2025. Nobitex alone, Iran’s largest cryptocurrency exchange, serves around 15 million users. But the headline numbers masked more important developments 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. It calls this a “sophisticated strategy to circumvent the global banking system.” Chainalysis estimated that half of Iran’s crypto assets are linked to the Islamic Revolutionary Guards Corps (IRGC). TRM put this figure lower at about 5%, but still identified more than 5,000 IRGC-connected wallet addresses that have moved $3 billion since 2023.
Separately, a TRM Labs report released in January revealed that two UK-registered companies, Zedcex and Zedxion, funneled $619 million in stablecoins into IRGC-linked wallets in 2024 alone. This is an increase of 2,500% compared to the previous year.
“This is not an opportunistic cryptocurrency abuser, but a licensed military entity operating exchange-branded infrastructure offshore,” said Ali Redboard, head of global policy at TRM.
What the war revealed
According to a TRM Labs analysis published shortly after the strike, internet connectivity in Iran dropped by approximately 99% when the US-Israel strike occurred on February 28th. Cryptocurrency trading volume fell by 80% within days. Exchanges went into defensive mode, with some halting withdrawals completely, others freezing withdrawals in both cryptocurrencies and rial (Iran’s national currency), and some moving to twice-daily batch processing.
However, the most notable move came from the Central Bank of Iran, which instructed exchanges to temporarily halt trading in the USDT-Toman pair overnight. The toman, a commonly used unit of rial, serves as the main bridge between cryptocurrencies and fiat currencies in Iran.
The pair was effectively becoming a real-time indicator of currency collapse, as the panic prompted Iranians to exchange their rial for USDT, which is pegged to the dollar. What stopped it was the central bank’s attempt to delay its repricing. In cryptocurrencies, it’s the equivalent of closing the foreign exchange market during a crisis.
When trading resumed, the order book was thin and prices briefly fluctuated, a sign that the market was struggling to function without the most important pair. This episode highlighted how deeply embedded USDT is in Iran’s financial structure.
Overall evaluation of TRM: “Evidence of stress, not failure.” Iran’s cryptocurrency ecosystem has shrunk, but not collapsed.
But TRM added a warning that while ordinary Iranians lost access when the internet went dark, actors with ties to the state may not. The decline in overall volumes may be masking quiet moves by regime-linked players to redeploy funds through whatever infrastructure remains online. TRM said something of that “is likely to emerge in due course” as transaction-level data is analyzed.
FATF connects the dots
Days after TRM released its findings, the Financial Action Task Force released a targeted report on stablecoins and non-hosted wallets on March 3. The timing is noteworthy.
The FATF report cited data from Chaineries showing that stablecoins accounted for 84% of all illicit cryptocurrency trading volume in 2025, identified Iranian actors using stablecoins for proliferation financing, and recommended that issuers adopt freeze, burn, and delisting capabilities.
With more than 250 stablecoins in circulation and a market capitalization exceeding $300 billion, the FATF called on countries to implement “proportionate and effective mitigation measures,” acknowledging that most jurisdictions have not yet developed regulatory frameworks that specifically address stablecoin risks.
paradox
The Iranian incident exposes fundamental tensions in the stablecoin ecosystem. USDT’s dollar peg – the same feature that helps legal cross-border payments – is also a great tool for sanctions avoidance. Tether maintains a “zero-tolerance policy for criminal use,” but as RUSI’s Tom Keatinge told Reuters in February, “the more we strain Iran’s economy, the more we should be prepared to deal with the consequences. One of them is expanding the use of cryptocurrencies.”
The war did not create Iran’s dependence on stablecoins. It just became impossible to ignore.
