Iran leverages cryptocurrencies to evade sanctions and as a financial lifeline for civilians amid war and soaring inflation, with billions in flows linked to the Revolutionary Guards.
LONDON: Iran has witnessed massive cryptocurrency flows since the start of the Middle East conflict. Experts say digital currencies are being used to circumvent sanctions on Iran’s Revolutionary Guards and act as a financial safe haven for civilians hit by soaring inflation.
More than $10 million worth of cryptocurrencies left Iranian exchange platforms between February 28 and March 2, according to data analytics firm Chainalysis. By March 5, nearly one-third of these funds had been transferred to foreign exchanges.
While some of this exodus can be explained by citizens rushing to protect their savings, the sheer size of the sums suggests the involvement of “regime actors”, Chainalysis’s Kaitlin Martin told AFP. Such action would likely occur out of fear of further sanctions or cyberattacks.
Several digital wallets used during this surge are directly linked to the Revolutionary Guards. “Even during these internet outages some outflows are seen, suggesting that some have access to the exchange’s cryptoasset holdings even when its website is inaccessible,” noted analysts Elliptic.
Wallets associated with the Guards were funded with more than $3 billion in cryptocurrencies last year. This represented more than half of the country’s cryptocurrency flows, a share that continues to grow.
For Iran, largely cut off from the traditional financial system, cryptocurrencies are an alternative channel. They allow the regime to sell embargoed oil or discreetly finance allied armed groups, such as Yemen’s Houthi rebels, according to US authorities.
The Financial Times reported that Iran offered ballistic missiles and drones for sale using cryptocurrencies earlier this year. These digital assets contribute to a veritable “shadow banking”, Craig Timm of anti-money laundering organisation ACAMS told AFP.
Quicker to send and less expensive than a bank transfer, cryptocurrencies are difficult to trace owing to regulatory loopholes. The Revolutionary Guards and Iranian central bank favour “stablecoins” pegged to the dollar to avoid volatility.
Civilians are turning en masse to bitcoin, which can be stored in personal wallets beyond the regime’s reach. This strategy was evident during protests in Iran ahead of the war, according to Chainalysis.
In a country where inflation was nearing 50% before the conflict, cryptocurrencies are acting as a “lifeline” for the population, said analyst Martin. They provide a hedge against the collapse of the national currency.
