Crypto Assets Become New Battleground in Israel-Iran Shadow War

The confrontation between Iran and Israel has extended to the Crypto Assets field.

On June 18, 2025, Iran's largest Crypto Assets exchange Nobitex suffered a major cyber attack. A hacker group claiming to be "Preying on Sparrows" infiltrated the Nobitex system and stole nearly $90 million in assets. The group accused Nobitex of assisting the Iranian government in evading international sanctions and funding illegal activities, and transferred the stolen funds to accounts associated with anti-Iranian messages.

Hackers also issued warnings on social media: "These cyber attacks are because Nobitex has become an important tool for the Iranian regime in violating sanctions. Collaborating with the infrastructure that violates sanctions of the Iranian regime will put your assets at risk."

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

Funding Channels Under Economic Sanctions

Iran's Crypto Assets market has a development history of many years, with its rise primarily stemming from economic and geopolitical pressures. Due to facing severe international sanctions, Iran's conventional financial channels are restricted, and international trade and fund transfers are hindered. In this context, Crypto Assets are seen as an alternative means.

Analysis indicates that the economic situation in the country is also an important factor driving the development of the crypto market. Iran has long faced high inflation and currency devaluation pressure, with the local currency, rial, continuing to weaken. The stock market is highly volatile, forcing many savers to invest their funds in 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, accounting for approximately 87% of the 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.

In addition, reports indicate that the vast majority of domestic crypto transactions in Iran are connected to the international market through Nobitex or similar exchanges. According to data from research institutions, a certain trading platform processed transactions worth 8 billion USD in Iran from 2018 to the end of 2022, with Nobitex handling transactions worth 7.8 billion USD. Nobitex also encouraged customers to use a certain token for anonymous transactions in a blog post to avoid "endangering asset safety due to sanctions."

In addition to Crypto Assets, the Iranian government has also made arrangements in the development of blockchain technology in recent years. The most representative are two officially supported blockchain projects: Kuknos and Borna. The Kuknos network was launched in 2019 by a consortium of four major banks in Iran, and its native coin PayMon is used for internal settlements within the banking system. At the same time, the Central Bank of Iran collaborated with blockchain companies to develop the Borna platform, which provides a blockchain-supported application framework for financial institutions based on technologies such as Hyperledger Fabric. This indicates that the Iranian authorities also 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 collaborating to launch a gold-backed cross-border stablecoin for trade settlement between the two countries and to evade financial sanctions. There are also reports indicating 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 settlement systems of neighboring countries.

Thanks to its abundant energy resources, Iran recognized the cryptocurrency mining industry as a legitimate sector in 2018. By 2021, Iran accounted for approximately 4.5% of the global Bitcoin hash rate, producing nearly $1 billion worth of Bitcoin each year for import trade and to mitigate the impacts of sanctions. The Iranian government has also welcomed this, implementing preferential electricity pricing policies for cryptocurrency mining facilities.

However, due to the burden on the power grid caused by high energy subsidies and regulatory requirements that miners must remit the mined Bitcoin to the central bank, many mining operations have chosen to go underground or operate outside the regulations. Commercial institutions estimate that by 2024, Iran's share of global Bitcoin computing power will have fallen to about 3.1%.

Policy from Open to Tightening

The Iranian government's attitude towards Crypto Assets has fluctuated multiple times, with regulatory policies showing a trajectory from early openness to gradual tightening.

Since 2018, Iran has officially recognized the digital currency mining industry as a legal industry in order to regulate the already prevalent mining operations. 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 specified price, while paying for electricity at the export rate. The low electricity prices have attracted overseas miners, including those from China, to invest in mining in Iran.

The "roadside mining pool" that briefly ranked among the top five globally in 2020 represents Chinese miners going to Iran to mine for gold. Reports have exclusively interviewed the partners of this mining pool, who, while conducting sea transport to Iran, have recovered tens of thousands of mining machines from miners who never tapped into Iranian channels at scrap prices, and have established Iran's largest compliant mining farm relying on their local connections.

However, this "energy exchange for coins" model quickly exacerbated 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 load on the power grid. Official data stated that legal mining sites consumed about 300 million kilowatt-hours, while unlicensed illegal mining sites consumed as much as 2 billion kilowatt-hours, severely affecting the electricity supply for people's livelihoods. Since then, during the peak summer electricity usage, the government has temporarily shut down 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 currencies 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 Assets advertising and mining machine sales. In December 2024, Iranian officials ordered a ban on the promotion of 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 it would hold illegal mining legally accountable.

These measures simultaneously require compliant mining farms to operate only when there is sufficient electricity supply, and power usage is not allowed outside of non-peak hours. It can be seen that as the issues of electricity consumption and safety caused by the popularity of mining machines become prominent, the government has imposed stricter regulations on the mining industry. By the end of 2024, the regulatory focus will shift to the crypto trading itself. In December 2024, the Central Bank of Iran issued new regulations in an attempt to block exchange transactions between Crypto Assets and the rial on domestic websites. In January 2025, a government-designated trading interface was introduced, requiring all domestic exchanges to connect to the regulatory system through this channel, facilitating the monitoring of user identity information and fund flows.

In February 2025, Iranian officials even announced a ban on the publication of Crypto Assets advertisements in any occasion and platform. Immediately after, following the Nobitex hacking incident in June, the Central Bank of Iran further strengthened its control over Crypto trading: according to reports from analysis companies, the Iranian government stipulated that domestic Crypto platforms can only operate between 10 AM and 8 PM (the so-called "Crypto trading curfew"), in order to improve regulatory efficiency and limit capital outflow. Various restrictive measures have emerged endlessly, which to some extent also reflect the authorities' consideration of balancing innovation promotion and financial security maintenance.

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Crypto Assets and Islamic Doctrine

As an Islamic Republic, Iran must also consider the regulations of Islamic law while promoting the development of Crypto Assets. Islamic teachings prohibit all forms of usury and gambling, 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, has a relatively open attitude towards this. In 2021, he explicitly stated that the buying, selling, and production of Crypto Assets "must comply with the laws and regulations of the Islamic Republic of Iran" and is not automatically considered contrary to Islamic teachings. In other words, as long as the government permits it, properly conducted digital currency transactions are not inherently "illegal." Additionally, Khamenei has also called on the religious community to provide opinions on new social issues, including Crypto Assets, to keep religious law up to date.

However, the opinions of different religious scholars are not entirely consistent. The famous Shia Grand Ayatollah Makarem Shirazi from Iran holds a cautious stance. He believes that cryptocurrencies like Bitcoin have "many uncertainties," such as a lack of government backing and susceptibility to abuse, and therefore their transactions do not comply with the requirements of Islamic law. Other religious leaders call for followers to adhere to the interpretations of the law by more qualified scholars in situations where the legality 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 balances the contradictions between Islamic doctrine and modern economic practices to some extent.

Under multiple economic uncertainties, Crypto Assets continue to attract the attention of a large number of young people and technology professionals in Iran. Analysis shows that with the development of information technology, the popularity of smartphones, and the gradual opening of Iran's external communications, the threshold for the general public to participate in digital currency trading is decreasing.

One of the most typical cases is the summer of 2024, when the mini-game "Hamster Strike" on social media platforms became popular in Iran, drawing criticism from politicians. At that time, a spokesperson for Iran's National Cyber Space Center issued a warning, stating that he had read a large number of discussions among Iranian users in many super groups recently, and claimed that using games for Crypto Assets mining had become a breeding ground for hacker crimes.

This controversy has also attracted the attention of the religious community, with a prominent Shia scholar describing Crypto Assets as "the root of many evils" and urging people to avoid playing games like Hamster Kombat that involve Bitcoin.

Participating in the crypto market also comes with risks. Reports indicate that Iran's low level of crypto knowledge has set a trap for criminals: fraud cases are rampant, and many investors suffer huge losses due to blindly following trends. Anonymous transactions on the black market also pose challenges for regulation. Coupled with the inherent volatility of the market and the 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 regarding their legality, security, and ethics continue. Nowadays, against the backdrop of the Iranian government's significant internet restrictions and even network outages in several regions, the development prospects of the crypto market may no longer be of concern to the general public compared to the harsh realities of war and national survival.

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