Crypto Assets have become a new battleground in the geopolitical struggle of the Middle East, with worrying market prospects under theocratic regimes.

Recently, geopolitical conflicts in the Middle East have spread to the Crypto Assets sector. On June 18, one of Iran's largest crypto exchanges suffered a major cyber attack, with approximately 90 million dollars in assets stolen. A pro-Israel hacker group claimed responsibility, accusing the exchange of aiding in sanction evasion and funding illegal activities. This incident not only exposed the vast scale of Iran's crypto market but also highlighted the deep intertwining of this theocratic regime with the crypto industry.

channels of fund circulation under the background of sanctions

Iran has been developing its Crypto Assets market for many years, primarily due to economic and geopolitical pressures. In the face of severe international sanctions and restricted conventional financial channels, Crypto Assets are seen as an alternative means. The domestic economic situation has also driven market development. Ongoing high inflation and currency devaluation have led many people to view Crypto Assets as tools for preserving value and diversifying risk.

Data shows that the total amount of Crypto Assets flowing into Iranian exchanges in 2022 was nearly $3 billion. Local exchanges are required to obtain regulatory licenses and operate in accordance with relevant regulations. Most domestic crypto trading connects with international markets through local exchanges.

The Iranian government has also made arrangements in blockchain technology. Officially supported projects include the Kuknos network launched by large banks and the Borna platform involving the central bank. These initiatives aim to enhance the efficiency and transparency of the financial system. Furthermore, Iran is exploring the possibility of launching cross-border stablecoins and central bank digital currencies with other countries.

Thanks to its abundant energy resources, Iran has vigorously developed its Crypto Assets mining industry. However, due to energy subsidy policies and regulatory requirements, many mining farms have chosen to operate illegally, resulting in a gradual decline in the country's share of global Bitcoin computing power.

Policy Fluctuation: From Open to Tightening

The Iranian government's attitude towards Crypto Assets has undergone a shift from openness to gradual tightening. In 2018, Crypto Assets mining was recognized as a legal industry, but subsequently, due to power shortages, the government implemented temporary bans or restrictions multiple times.

In terms of trading regulation, the Central Bank of Iran began restricting the use of foreign digital currencies as early as 2020. In recent years, authorities have intensified control over Crypto Assets advertisements and the sale of mining machines. By the end of 2024, the regulatory focus shifted to Crypto Assets trading itself, including requiring exchanges to connect to the official regulatory system and limiting the publication of advertisements.

Recently, after a significant hacking incident, the Iranian government further tightened its controls. According to reports, authorities have implemented a "crypto assets trading curfew," stipulating that trading platforms can only operate during specific hours each day to enhance regulation and limit capital outflow. These measures reflect the government's balancing act between promoting innovation and maintaining financial security.

Religious Perspective: Crypto Assets and Islamic Doctrine

As an Islamic Republic, Iran must consider Sharia regulations when developing Crypto Assets. Islamic teachings prohibit usury and gambling, and the volatility of Crypto Assets trading has sparked controversy.

The Supreme Leader of Iran has a relatively open attitude towards this, believing that as long as national regulations are followed, trading in Crypto Assets does not violate religious doctrines. However, there are divisions among religious scholars. Some conservatives believe that Crypto Assets carry uncertainties and do not meet the requirements of Islamic law.

The official stance attempts to balance doctrine with modern economic practices, emphasizing that crypto activities must be conducted within a legal framework to avoid excessive speculation. This attitude has alleviated the contradiction between religion and economic development to some extent.

Despite facing multiple uncertainties, Crypto Assets have still attracted a large number of young people and technology professionals in Iran. With the development of information technology and the opening of communication, the threshold for ordinary people to participate in digital currency trading has been lowered. However, the low level of encryption knowledge also brings fraud risks, coupled with market volatility and insufficient legal protection, which makes some families cautious about this.

Overall, although Crypto Assets are gradually being accepted in Iran, their legality, security, and morality remain controversial. In the current situation, ordinary people may be more concerned about war and survival issues rather than the development prospects of the crypto market.