The Israel-Hamas conflict casts a shadow over the encryption field, putting the digital asset market under theocratic regimes in jeopardy.

The dispute between Iran and Israel has spread to the encryption currency sector.

On June 18, 2025, one of Iran's largest cryptocurrency trading platforms suffered a shocking cyber attack that stunned the industry. A hacker group claiming to be "Sparrow Catcher" breached the platform's systems and stole nearly $90 million in assets. The group alleged that the exchange assisted the Iranian government in evading international sanctions and funding illegal activities, and that the stolen funds were transferred to accounts containing anti-Iranian messages.

Hackers are also warning on social media: "These cyber attacks are due to the exchange becoming a key tool for the Iranian regime to fund illegal activities and violate sanctions. Collaborating with infrastructure that is funded by the Iranian regime for illegal activities and sanction violations puts your assets at risk."

This shocking hacker attack not only exposed Iran's vast encryption currency market to the public but also made people realize that this country, which is the only one in the world to fully implement Islamic theocratic rule, is also deeply intertwined with the digital asset industry.

Motivation: Funding Channels Under Sanctions

Iran's cryptocurrency market has developed for many years, and its interest in cryptocurrency mainly stems from economic and geopolitical pressures. Due to severe sanctions imposed by multiple countries, Iran's conventional financial channels are restricted, hindering international trade and capital transfers. In this context, cryptocurrency is seen as an alternative means.

Analysis indicates that the economic situation in the country is also an important reason driving the development of the encryption market. Iran has long faced high inflation and currency depreciation pressures, with its local currency, the rial, continuing to weaken. The Iranian stock market is highly volatile, forcing many savers to invest funds in digital assets to hedge against risks. For ordinary Iranian citizens, encryption is seen as a tool for preserving value and diversifying assets, especially during times of economic turmoil.

According to an analysis report by a blockchain security company, the total amount of cryptocurrency flowing into major exchanges in Iran in 2022 was close to 3 billion USD, with the platform that was attacked by hackers being the largest trading platform in the country, holding approximately 87% market share. Other major platforms include several local exchanges. These local exchanges must operate with the permission of regulatory authorities and comply with regulations such as Anti-Money Laundering (AML) and Know Your Customer (KYC).

In addition, reports indicate that the vast majority of domestic encryption transactions in Iran are connected to international markets through this large exchange or similar platforms. According to data from a blockchain research organization, a well-known international exchange processed transactions worth 8 billion dollars from Iran between 2018 and the end of 2022, with the large exchange handling transactions worth 7.8 billion dollars. The exchange also encouraged customers to use specific tokens for anonymous transactions in a blog post published in 2021, to avoid "endangering asset security due to sanctions."

In addition to digital assets, the Iranian government has also made efforts in the development of blockchain technology 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 settlements within the banking system. At the same time, the Central Bank of Iran collaborated with a blockchain company 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 government also hopes to leverage blockchain technology to enhance the efficiency and transparency of its financial system.

In addition, Iran and Russia are reportedly collaborating to launch a gold-backed cross-border stablecoin for trade settlement between the two countries and to circumvent financial sanctions. There are also reports indicating that the Central Bank of Iran is studying the launch of its own central bank digital currency "encrypted rial" and had planned to connect it with the clearing systems of countries like the UAE.

Thanks to Iran's abundant energy resources, the country recognized cryptocurrency mining as a legitimate industry 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 impact of sanctions. The Iranian government also supports this by implementing preferential electricity pricing policies for cryptocurrency mining farms.

However, due to the burden on the power grid from high energy subsidies, as well as regulatory requirements for miners to submit the mined bitcoins to the central bank, many mines have chosen to operate underground or circumvent regulations. Some institutions estimate that by 2024, Iran's share of global bitcoin hash power will have fallen to about 3.1%.

Policy: From Open to Tightening, Implementing a Curfew on Encryption Transactions

The Iranian government's attitude towards cryptocurrency has gone through multiple fluctuations, with its regulatory policies showing a trajectory from early openness to gradual tightening.

Since 2018, Iran has officially recognized the digital asset mining industry as a legitimate sector in order to regulate the already prevalent mining operations. The government has implemented measures requiring licensed miners to use efficient equipment, and only allows the sale of mined assets at a fixed price to the central bank, while electricity fees must be paid according to export electricity prices. The low electricity prices have attracted overseas miners, including those from China, to invest in mining in Iran.

In 2020, the "roadside mining pool" that briefly ranked among the top five in global computing power represents Chinese miners going to Iran for gold. A media outlet once exclusively interviewed the partners of this mining pool, who, while doing maritime shipping to Iran, recovered over ten thousand mining machines at scrap prices from miners who had never established connections in Iran, and relied on their local relationships to establish the largest compliant mining farm in Iran.

However, this "energy-to-coin" model quickly exacerbated the power shortage. In May 2021, following a rare summer blackout, President Hassan Rouhani announced a four-month temporary ban on all cryptocurrency mining activities, until late September of that year, to alleviate the load on the power grid. Official data indicated that legal mining operations consumed about 300 million kilowatt-hours, while unauthorized illegal mining operations consumed up to 2 billion kilowatt-hours, severely affecting electricity for people's livelihoods. Since then, during the summer peak electricity consumption, the government has temporarily shut down some mines 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 domestically as early as 2020, strengthening control over the circulation of encryption currencies. After 2022, Iranian regulatory authorities intensified restrictions on encryption advertising and the sale of mining machines. In December 2024, Iranian officials ordered a ban on promoting encryption 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 authority also indicated that legal accountability would be imposed on illegal mining.

These measures also require compliant mining sites to operate only when power supply is sufficient, and electricity is not allowed to be used outside of non-peak periods. It can be seen that, with the increasing electricity and safety issues caused by the popularization of mining machines, the government has imposed stricter regulations on the mining industry. By the end of 2024, the regulatory focus will shift to encryption transactions themselves. In December 2024, the Central Bank of Iran introduced new regulations aimed at blocking exchange transactions between cryptocurrencies and rials on domestic websites. In January 2025, a government-designated trading interface (API) was launched, 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, the Iranian government even announced a ban on the publication of cryptocurrency advertisements on any occasion and platform. Shortly after, following a hacking incident in June, the Central Bank of Iran further strengthened its control over cryptocurrency trading: According to reports from analysis companies, the Iranian government stipulated that domestic cryptocurrency platforms are only allowed to operate between 10 a.m. and 8 p.m. each day (the so-called "cryptocurrency trading curfew") to improve regulatory efficiency and limit capital outflow. Various restrictive measures have emerged one after another, reflecting to some extent the authorities' balancing act between promoting innovation and maintaining financial security.

Exegesis: Cryptocurrency and Islamic Doctrine

As an Islamic Republic, Iran must also consider the regulations of Islamic law (Sharia) when promoting the development of encryption currency. Islamic teachings prohibit all forms of usury (Riba) and gambling (Gharar), and the trading of encryption currency has been questioned by some conservatives due to its extreme 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 cryptocurrency "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, the trading of digital currency that operates according to the regulations is not "illegal." Furthermore, Khamenei has also called on the religious community to provide opinions on new social issues, including cryptocurrency, in order to keep religious law up to date.

However, the opinions of scholars from different religious backgrounds are not entirely consistent. The prominent Shia Grand Ayatollah Makarem Shirazi from Iran takes a cautious stance. He believes that cryptocurrencies like Bitcoin have "many uncertainties," such as a lack of government endorsement and ease of abuse, and therefore their transactions do not meet the requirements of Islamic law. Some other religious leaders call for believers to adhere to interpretations of religious law from those with deeper qualifications when the law is unclear.

Although the Iranian authorities do not explicitly regard cryptocurrency as a religious taboo, they emphasize that operations must be conducted within the framework of national laws and regulations, avoiding excessive speculative behavior. This stance somewhat balances the contradictions between Islamic doctrines and modern economic practices.

Under multiple economic uncertainties, encryption 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 the gradual opening of Iran's external communications, the threshold for ordinary citizens to participate in digital currency trading is lowering.

One of the most typical cases is the popularity of the instant messaging app's mini-game "Hamster Kombat" in Iran during the summer of 2024, which attracted criticism from political figures. At that time, Hossein Delirian, 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 supergroups recently, and claimed that using games for cryptocurrency mining had become a breeding ground for hacker crimes.

This controversy has also attracted the attention of the religious community, with the famous Shia scholar Ayatollah Nasser Makarem Shirazi describing cryptocurrency as "the source of many drawbacks" and urging people to avoid playing games like Hamster Kombat that involve Bitcoin.

Participating in the encryption market also comes with risks. Reports indicate that the low level of encryption knowledge in Iran has set traps for criminals: fraud cases are rampant, and many investors suffer significant losses due to blindly following the trend. Anonymous transactions in 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 cryptocurrency is gradually being more widely accepted in Iran, discussions around its legality, security, and ethics are still ongoing. Today, against the backdrop of the Iranian government imposing significant internet restrictions and network interruptions in several regions, the development prospects of the crypto market may no longer matter to the ordinary people compared to the real dilemmas of war and national survival.

![The encryption market has become a new battleground in the shadowy war of Iran, with the encryption market under the shadow of a theocratic regime](