Crypto Assets have become a new battlefield in the Israel-Palestine conflict, as the digital asset market under the theocratic regime falls into shadow.

The confrontation between Iran and Israel has spread to the Crypto Assets sector.

On June 18, 2025, Iran's largest Crypto Assets exchange, Nobitex, was shocked by a cyber attack that stunned the industry. A hacker organization claiming to be "Sparrow Catcher", which is pro-Israel, breached Nobitex's system defenses and stole nearly $90 million in assets. The organization claimed that Nobitex assisted the Iranian government in evading international sanctions and funding illegal activities, and that the stolen funds were transferred to accounts carrying anti-Iranian messages.

Hackers are also posting warnings on social media: "These cyber attacks are due to Nobitex becoming an important tool for the Iranian regime to violate sanctions. Collaborating with infrastructure that violates sanctions with the Iranian regime will put your assets at risk."

This serious hacking incident not only revealed Iran's vast Crypto Assets market but also made people realize that this is the only country in the world that has fully implemented Islamic theocracy, which has deeply integrated with the Crypto Assets industry.

Motive: Funding Channels Under Sanctions

Iran's interest in Crypto Assets mainly stems from economic and geopolitical pressures. Facing severe sanctions, Iran's conventional financial channels are restricted, hindering international trade and funds transfer. In this context, Crypto Assets are seen as an alternative means.

Analysis indicates that the country's economic situation is also an important reason driving the development of the crypto market. Iran has long faced high inflation and pressure from currency devaluation, with its local currency, rial, continuing to weaken. The stock market has been highly volatile, forcing many savers to invest funds into Crypto Assets to hedge against risks. For ordinary Iranians, Crypto Assets are seen as a tool for preserving value and diversifying assets, especially during times of economic turmoil.

According to an analysis report by a security company, the total amount of Crypto Assets flowing into major exchanges in Iran in 2022 was nearly $3 billion, with Nobitex being the largest trading platform in the country, holding approximately 87% market share. Other major platforms include Wallex, Excoino, Aban Tether, and Bit24. These local exchanges are required to operate with the approval of regulatory authorities and comply with regulations such as anti-money laundering and customer identification.

According to reports, the vast majority of crypto transactions within Iran are connected to the international market through Nobitex or similar exchanges. According to data from a research institution, Nobitex processed transactions worth $7.8 billion from 2018 to the end of 2022. Nobitex also encouraged customers to use a certain token for anonymous transactions in a blog post released in 2021 to avoid the risks posed by sanctions.

In terms of the development of blockchain technology, 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 a consortium of Iran's four major banks and its native token is used for internal settlement within the banking system. At the same time, the Central Bank of Iran collaborated with a blockchain company to develop the Borna platform, providing a blockchain-supported application framework for financial institutions. This indicates that the Iranian authorities hope to leverage blockchain technology to enhance the efficiency and transparency of the financial system.

In addition, it is claimed that Iran and Russia are planning to launch a gold-backed cross-border stablecoin for trade settlements between the two countries and to circumvent financial sanctions. There are also reports that the Central Bank of Iran is studying the launch of its own central bank digital currency "encryption rial" and had previously planned to connect it with the clearing systems of other countries.

Thanks to its abundant energy resources, Iran recognized the encryption currency mining industry as a legal sector in 2018. In 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 mitigate the impacts of sanctions. The Iranian government also welcomes this development and has implemented preferential electricity pricing policies for crypto asset mining farms.

However, due to the burden on the power grid caused by high energy subsidies and regulatory requirements for miners to surrender the mined Bitcoin to the central bank, many mining farms have chosen to operate underground or circumvent regulations. It is estimated that by 2024, Iran's share of global Bitcoin hash power will have decreased to about 3.1%.

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

The Iranian government's regulatory policy on Crypto Assets has shown a trajectory from early openness to gradual tightening.

Since 2018, Iran has officially recognized the digital asset mining industry as a legal industry to regulate the mining operations that were already prevalent. The government has implemented measures requiring licensed miners to use efficient equipment and only allows them to sell the mining proceeds to the central bank at a set price, while paying electricity fees according to the export electricity price. The low electricity prices have attracted overseas miners, including those from China, to invest in mining in Iran.

However, this "energy exchange for coin" model quickly intensified the power shortage. In May 2021, after experiencing a rare summer blackout, President Hassan Rouhani announced a four-month temporary ban on all Crypto Assets mining activities, until late September of that year, to alleviate the strain on the power grid. Since then, during every summer peak electricity consumption, 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 crypto assets. After 2022, Iranian regulatory authorities tightened restrictions on crypto advertising and the sale of mining machines. In December 2024, Iranian officials ordered a ban on 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 regulatory department also stated that illegal mining would face legal accountability.

These measures also require compliant mining farms to operate only when there is sufficient power supply, and electricity usage is not allowed outside of off-peak hours. It can be seen that as the electricity and safety issues caused by the proliferation of mining machines become more prominent, the government has imposed stricter regulations on the mining industry. By the end of 2024, the regulatory focus shifted to the crypto trading itself. In December 2024, the Central Bank of Iran introduced new regulations attempting to block the exchange transactions between crypto assets and rials on domestic websites. In January 2025, a government-designated trading interface was launched, requiring all domestic exchanges to connect to the regulatory system through this channel, facilitating the monitoring of user identity information and capital flow.

In February 2025, the Iranian government even announced a ban on publishing Crypto Assets advertisements on any occasion and platform. Shortly after, following the Nobitex hacking incident in June, the Central Bank of Iran further tightened its control over crypto trading: reports indicated that the Iranian government stipulated that domestic crypto platforms are only allowed to operate between 10 AM to 8 PM each day (the so-called "crypto trading curfew") to improve regulatory efficiency and limit capital outflows. Various restrictive measures have emerged one after another, reflecting to some extent the authorities' balance considerations between promoting innovation and maintaining financial security.

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Exegesis: Crypto Assets and Islamic Doctrine

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

The Supreme Leader of Iran, Khamenei, holds a relatively open attitude towards this. In 2021, he clearly stated that the buying, selling, and production of Crypto Assets "must comply with the laws and regulations of the Islamic Republic of Iran" and are not automatically considered to be in contradiction with Islamic teachings. In other words, as long as the government permits it, the trading of digital assets conducted in accordance with regulations is not "illegal". Additionally, Khamenei has called on the religious community to provide opinions on new social issues, including Crypto Assets, to keep religious laws up to date.

However, the opinions of different religious scholars are not completely consistent. The famous Shia Grand Ayatollah Makarem Shirazi from Iran takes a cautious stance. He believes that cryptocurrencies such as Bitcoin have "many uncertainties," such as the lack of government backing and the ease of abuse, and therefore their transactions do not comply with the requirements of Islamic law. Some other religious leaders call on believers to follow the interpretations of religious law from those with deeper qualifications in cases where the law is unclear.

Although the Iranian authorities do not explicitly regard Crypto Assets 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 position somewhat balances the contradiction between Islamic teachings and modern economic practices.

In the face of multiple economic uncertainties, Crypto Assets continue to attract the attention of a large number of young people and technology practitioners in Iran. Analysis shows that with the development of information technology, the popularization of smartphones, and Iran's gradual opening up to external communication, the threshold for ordinary people to participate in digital currency trading is decreasing.

One of the most typical cases is the "Hamster Smash" game on a certain instant messaging platform, which became popular in Iran during the summer of 2024, leading to condemnation from officials. At that time, Hossein Delirian, spokesperson for the Iranian National Cyber Space Center, issued a warning, stating that he had read numerous discussions among Iranian users in many supergroups recently, and claimed that using games for Crypto Assets mining had become a hotbed for hacker crimes.

This controversy has also attracted the attention of the religious community, with the renowned Shia scholar Ayatollah Nasser Makarem Shirazi describing Crypto Assets as "the source of many ills" and urging people to avoid playing games involving Bitcoin, such as "Hamster Battle."

Participating in the Crypto Assets market also comes with risks. Reports indicate that Iran's low level of encryption knowledge has set a trap for criminals: fraud cases are rampant, and many investors suffer huge losses due to blind following of trends. Anonymous transactions in the black market also pose challenges for regulation. Coupled with the market's inherent volatility and lack of mature legal protections, some Iranian families adopt a cautious or even wait-and-see attitude towards such assets.

Overall, although Crypto Assets are gradually being more widely accepted in Iran, discussions about their legality, security, and morality continue. Today, against the backdrop of the Iranian government significantly restricting internet access and the occurrence of network outages in several regions, for the ordinary people, the development prospects of the crypto market may be of little concern compared to the realistic dilemmas of war and national survival.

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