The Crypto Market Becomes a New Battlefield for the Iran-Israel Conflict: The Shadow of the Crypto Market Under Theocracy

On June 18, 2025, Nobitex, Iran's largest cryptocurrency exchange, suffered a shocking cyberattack. A pro-Israel hacking group calling themselves "Predatory Sparrow" breached Nobitex's system and "devastatingly" stole nearly $90 million in assets. The group claimed that Nobitex assisted the Iranian government in circumventing international sanctions and funding "terrorism," and transferred the stolen funds to accounts with anti-Iran messages.

The hackers also posted on X, warning: "These cyberattacks are due to Nobitex becoming an important tool for the Iranian regime to fund terrorism and violate sanctions. Collaborating with the infrastructure that funds terrorism and violates sanctions by the Iranian regime puts your assets at risk."

This shocking hacking incident not only brought Iran's vast cryptocurrency market to public attention but also made people realize that this country, the only one in the world that fully implements Islamic theocracy, is also deeply intertwined with the cryptocurrency industry.

Motivation: A Funding Channel Under Sanctions

Iran's cryptocurrency market has been developing for several years, and its interest in cryptocurrencies mainly stems from economic and geopolitical pressures. Due to severe sanctions imposed by the United States and other countries, Iran's conventional financial channels are restricted, and international trade and fund transfers are obstructed. Under such circumstances, cryptocurrencies are seen as an alternative means.

The Peninsula Report pointed out that the country's economic situation is also an important reason for the development of the crypto market. Iran has long faced high inflation and currency devaluation pressures, with the national currency, the rial, continuously weakening. The volatile Iran-US stock market has forced many depositors to invest in cryptocurrencies to hedge risks. For ordinary Iranian people, cryptocurrencies are seen as a means of preserving value and diversifying assets, especially during times of economic turmoil.

According to an analysis report by blockchain security company TRM Labs, the total amount of cryptocurrency flowing into Iranian exchanges in 2022 was close to $3 billion, with Nobitex, which was attacked by Israeli hackers this time, being the largest trading platform in the country, accounting for about 87% of the market share. Other major platforms also include Wallex, Excoino, Aban Tether, and Bit24, etc. These local exchanges all need to obtain permission from regulatory authorities and operate in compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations.

In addition, Reuters once reported that the vast majority of Iran's domestic crypto transactions are connected to the international market through Nobitex or similar exchanges. According to data from blockchain research firm Chainalysis, from 2018 to the end of 2022, Binance processed $8 billion worth of Iranian transactions, of which Nobitex processed $7.8 billion worth of transactions. Nobitex also encouraged customers to use Tron tokens for anonymous transactions in a blog post published in 2021 to avoid "jeopardizing asset security due to sanctions."

In addition to crypto assets, in terms of blockchain technology development, the Iranian government has also made some arrangements in recent years. The most representative are two blockchain projects supported by the government: Kuknos and Borna. The Kuknos network was launched in 2019 by four major Iranian banks (such as Melli Bank, Pasargad Bank, etc.) in conjunction with technology company Tosan. Its native token PayMon (PMN) is used for internal settlement within the banking system. During the same period, the Central Bank of Iran collaborated with blockchain company Areatak to develop the Borna platform, which is based on technologies such as Hyperledger Fabric and provides a blockchain-supported application framework for financial institutions. This indicates that the Iranian authorities also hope to use blockchain technology to improve the efficiency and transparency of the financial system.

In addition, it is reported that Iran and Russia are jointly planning to launch a cross-border stablecoin backed by gold to settle trade between the two countries and evade financial sanctions. There are also reports that the Central Bank of Iran is studying the launch of its own central bank digital currency "Crypto Rial" and had planned to connect it with the clearing systems of countries such as the UAE.

Thanks to Iran's abundant energy resources, the country recognized cryptocurrency mining as a legitimate industry in 2018. In 2021, Iran accounted for about 4.5% of the global Bitcoin hash rate, producing nearly $1 billion worth of Bitcoin annually, which was used for import trade and to mitigate the impact of sanctions. The Iranian authorities were also happy to see this and implemented preferential electricity price policies for cryptocurrency mines.

However, due to the burden on the power grid caused by high energy subsidies and regulatory requirements that miners must hand over the mined bitcoins to the central bank, many mines chose to go underground or operate in a way that circumvents regulations. The Arabian Gulf Business Insight Institute (AGBI) estimates that by 2024, Iran's share in the global Bitcoin hash rate had dropped to about 3.1%.

Policy: From Openness to Tightening, Implementing a Crypto Trading Curfew

The Iranian government's attitude towards cryptocurrencies has swung several times, and the regulatory policies towards cryptocurrencies have shown a trajectory from early openness to gradual tightening.

Since 2018, Iran has officially recognized digital currency mining as a legitimate industry in order to regulate the already prevalent mining operations. The government introduced measures requiring licensed miners to use efficient equipment and only allowed them to sell the mined cryptocurrency to the central bank at a certain price, while paying electricity bills at export electricity prices. The low electricity prices attracted overseas miners, including those from China, to invest in mining in Iran.

The "roadside mining pool," which briefly ranked in the top five in global hash rate in 2020, is a representative of Chinese miners going to Iran to seek gold. PANews once exclusively interviewed a partner of the mining pool, who were engaged in Iran's maritime transport. They had never mined in Iran before and had purchased tens of thousands of mining machines at scrap prices from miners in Iran who had not established channels, and relied on their local connections to establish the largest compliant mining farm in Iran.

However, this "energy-for-currency" model soon exacerbated the power shortage. In May 2021, after an unusual summer power outage, President Hassan Rouhani announced a four-month temporary ban on all cryptocurrency mining activities until late September of that year to relieve the power grid load. Official data showed that legal mining farms consumed about 300 million kilowatt-hours of electricity, while unlicensed illegal mining farms consumed as high as 2 billion kilowatt-hours, severely affecting the electricity supply for people's livelihoods. Since then, every summer during the peak electricity consumption period, the government has temporarily shut down some mining farms to ensure the electricity supply for the people.

In terms of transaction supervision, the Central Bank of Iran had banned individuals from using foreign-mined digital currencies for transactions within the country as early as 2020 to strengthen the control of cryptocurrency circulation. After 2022, Iranian regulatory authorities tightened restrictions on crypto advertising and mining machine sales. In December 2024, Iranian officials ordered the prohibition of promoting crypto mining machines and related training courses on the Internet and required major e-commerce platforms to remove related advertising content. In the same month, the energy authorities also stated that they would hold illegal mining activities legally accountable.

These measures also required compliant mining farms to only operate when the power supply was sufficient and not to use electricity outside of off-peak hours. It can be seen that with the increasing prominence of electricity and security issues caused by the widespread use of mining machines, the government has imposed stricter regulations on the mining industry. By the end of 2024, the regulatory focus had shifted to crypto trading itself. In December 2024, the Central Bank of Iran introduced new rules to block the exchange of cryptocurrencies and rials on domestic websites. In January 2025, it also launched a government-designated trading interface (API), requiring all domestic exchanges to access the regulatory system through this channel to facilitate the monitoring of user identity information and fund flow.

In February 2025, Iranian officials even banned the advertising of cryptocurrencies in any situation and on any platform. Subsequently, after the Nobitex hacking incident in June, the Central Bank of Iran further strengthened control over crypto trading: According to an analysis company Chainalysis report, the Iranian government stipulated that domestic crypto platforms were only allowed to operate between 10 a.m. and 8 p.m. daily (so-called "crypto trading curfew") to improve regulatory efficiency and limit capital outflow. Various restrictive measures continue to emerge, which to some extent also reflects the authorities' consideration of balancing innovation promotion and financial security.

Interpretation: Cryptocurrencies and Islamic Doctrine

As an Islamic Republic, Iran must also consider the norms of Islamic law (Sharia) when promoting the development of cryptocurrencies. Islamic doctrine strictly prohibits all forms of usury (Riba) and gambling (Gharar), and cryptocurrency trading, due to its violent fluctuations and speculative nature, has been questioned by some conservatives.

Iran's Supreme Leader Khamenei has a relatively open attitude towards this. In 2021, he explicitly stated that the buying and selling and production of cryptocurrencies "must comply with the laws and regulations of the Islamic Republic of Iran" and are not automatically considered to be against Islamic doctrine. In other words, as long as the government allows it, digital currency trading itself is not "illegal" as long as it is operated in accordance with regulations. In addition, Khamenei also called on the religious community to express opinions on new social issues, including cryptocurrencies, to keep the law in line with the times.

However, the opinions of different religious scholars are not entirely consistent. The famous Shiite Grand Ayatollah Makarem Shirazi in Iran holds a cautious position. He believes that cryptocurrencies such as Bitcoin have "many uncertainties," such as the lack of government endorsement and the ease of abuse, so their trading does not meet the requirements of Islamic law. Other religious leaders (such as Sistani) require believers to follow the more experienced legal interpretations in cases where the law is unclear.

Although the Iranian authorities have not regarded cryptocurrencies as a clear religious taboo, in practice, they emphasize that they must be carried out within the scope of national laws and regulatory frameworks and avoid excessive speculative behavior. This position balances the contradiction between Islamic doctrine and modern economic practice to a certain extent.

Under multiple economic uncertainties, crypto assets have still attracted the attention of a large number of Iranian young people and technology practitioners. CCTV.com analysis shows that with the development of information technology, the popularization of smartphones, and the gradual opening up of Iran's external communication, the threshold for ordinary people to participate in digital currency trading is being lowered.

The most typical case was in the summer of 2024 when the point-and-earn mini-game "Hamster Kombat" on Telegram became popular in Iran and then caused a political debate. At that time, the spokesperson for the Iranian National Cyberspace Center, Hossein Delirian, issued a warning. He said that he had read a lot of discussions by Iranian users in many super groups and that the use of games for cryptocurrency mining had become a breeding ground for hacker crimes.

This controversy also attracted the attention of the religious community, and the famous Shiite scholar Ayatollah Nasser Makarem Shirazi described cryptocurrencies as "the root of many evils" and urged people to avoid playing games involving bitcoins, such as Hamster Kombat.

Participating in the crypto market also comes with risks. The Peninsula Report pointed out that Iran's low level of crypto knowledge has set traps for criminals: fraud cases are rampant, and many investors have suffered great losses due to blind following. Anonymous transactions on the black market also pose a challenge to regulation. Combined with the inherently volatile market and the lack of mature legal protection, some Iranian families are cautious or even wait-and-see about such assets.

Overall, although cryptocurrencies are gradually accepted more widely in Iran, the discussions about their legality, security, and morality are still ongoing. Now, amidst the Iranian government's significant internet shutdowns and speed restrictions, with some areas even experiencing internet outages, for ordinary people, compared to the real predicament of war and national survival, the development prospects of the crypto market may no longer be a concern.