Financial Channels Amidst the War: Iran's Stablecoin Trading Remains Unbroken, USDT Becomes a Key Hedging Tool
On March 4th, it was reported that despite recent escalations in Middle Eastern tensions and airstrikes, Iran’s cryptocurrency system has not collapsed as some observers predicted. Instead, it has highlighted the key role of stablecoins in the country’s financial system. Several blockchain analysis firms noted that even during significant internet disruptions and sharp declines in market trading, USD-pegged USDT remains an important channel for Iranian residents and institutions to transfer value.
Before the conflict erupted, Iran’s crypto market had already formed a sizable gray economy. According to estimates from TRM Labs and Chainalysis, Iran’s crypto trading volume could reach $8 billion to $10 billion by 2025. Blockchain data also shows that the Central Bank of Iran previously purchased approximately $507 million worth of USDT to bypass restrictions of the traditional international banking system. Some research institutions believe that certain crypto transactions are linked to wallet addresses associated with the Islamic Revolutionary Guard Corps, which have transferred about $3 billion since 2023.
After the airstrike on February 28th, internet connectivity in Iran dropped by about 99%, and crypto market trading volume immediately fell by roughly 80%. Some platforms paused withdrawals or limited fund flows, while others processed transactions in batches to reduce systemic risk. Meanwhile, the Central Bank of Iran also ordered a suspension of USDT-to-Toman trading. Toman is a common denomination of the Iranian rial, and this trading pair has long been viewed as a key channel for residents to convert their local currency into dollar-valued assets.
Amid escalating tensions, large amounts of funds attempted to shift from the rial to USDT, making this trading pair a real-time indicator of currency devaluation pressure. The suspension of trading was seen as an emergency measure similar to shutting down the foreign exchange market to slow down the local currency’s depreciation. After trading resumed, market liquidity declined significantly, causing brief price dislocations, but the overall trading system remained intact.
TRM Labs stated that these changes are more like a “stress test” rather than a systemic collapse. During the internet outage, ordinary users faced restrictions accessing crypto networks, but some institutions may have continued to operate funds through alternative channels.
Meanwhile, the Financial Action Task Force (FATF) released a report on March 3rd emphasizing that the proportion of stablecoins in illegal transactions is rising. The report cited Chainalysis data suggesting that by 2025, stablecoins could account for up to 84% of illegal crypto transactions, and recommended that countries strengthen regulation of stablecoin issuers and wallet addresses.
Currently, there are over 250 types of stablecoins worldwide, with a total market cap exceeding $300 billion. Analysts believe that the Iran case highlights the dual nature of stablecoin systems: on one hand, they facilitate cross-border payments; on the other, they can serve as important tools to bypass sanctions. As geopolitical conflicts continue, the influence of this financial technology is expanding.
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