Iranian crypto outflows leap 70% amid sanctions

Chainalysis, a blockchain analytics firm, reported a sharp increase in cryptocurrency outflows from Iranian exchanges, totaling $4.2 billion in 2024, marking a 70% rise from the previous year.

This surge reflects a growing trend among Iranians to use cryptocurrency as a means of capital flight in the face of geopolitical tensions and economic instability.

The firm’s analysis indicates that the spike in crypto activity from Iranian exchanges is closely linked to significant geopolitical events and a declining trust in the government.

The increase in outflows, which spanned across various crypto assets including stablecoins, was particularly notable in bitcoin transactions. Bitcoin’s appeal in Iran may be attributed to its ability to provide a censorship-resistant and self-custodial option during times of crisis.

Chainalysis highlighted the impact of extensive financial restrictions on Iran, which has led individuals and businesses to seek alternative financial options due to the lack of access to global banking systems.

Despite the Iranian government’s strict control over domestic crypto infrastructure and efforts to curb capital flight, such as the sudden freeze on exchange withdrawals in December 2024, the use of cryptocurrency in the country has continued to grow.

Globally, sanctioned jurisdictions and entities received $15.8 billion in cryptocurrency in 2024, accounting for 39% of all illicit crypto transactions.

According to The Block, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) has increased its focus on disrupting sanctioned activities, including Iran’s growing crypto usage. However, jurisdictions now account for nearly 60% of total sanctions-related activity, surpassing individual entities.

In the face of legal challenges and sanctions, decentralized platforms like Tornado Cash have managed to maintain operations. Despite being sanctioned in 2022 for facilitating the laundering of over $455 million, Tornado Cash saw a 108% year-over-year increase in transaction volume in 2024. The platform continues to process significant transaction volumes monthly, demonstrating the resilience of decentralized smart contracts against enforcement efforts.

Chainalysis also noted the legal developments surrounding Tornado Cash, including a U.S. federal appeals court ruling that OFAC had exceeded its authority by sanctioning the platform’s smart contract addresses.

This ruling, along with a subsequent court order to reverse the sanctions, underscores the challenges of regulating decentralized finance (DeFi) protocols without undermining the principles of decentralization and privacy.

Earlier this month, Chainalysis reported on other trends in the cryptocurrency space, including a rise in losses due to pig butchering scams and a decrease in ransomware extortion in 2024.

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