Iranians 'flocked' to crypto amid geopolitical tensions in 2024 as exchange outflows surged 70% to $4.2 billion: Chainalysis

Iranians increasingly turned to cryptocurrency as a tool for capital flight amid geopolitical tensions and economic instability in 2024, according to Chainalysis’ latest report.

Amid extensive financial restrictions on Iran, where currency instability and devaluation persist, the lack of access to global banking systems forces individuals and businesses to explore alternative financial options, the blockchain analytics firm explained. 

In 2024, Iranian exchanges accounted for a larger share of sanctions-related crypto activity, with usage spikes closely correlating with geopolitical events, like Iranian missile launches, and declining trust in the government. Crypto outflows from Iranian platforms surged to $4.2 billion as a result — up 70% year-over-year. While an increase in outflows was observed across all crypto assets, including stablecoins, Chainalysis noted a significantly higher volume in bitcoin, with its censorship-resistant, self-custodial nature making it an appealing option during crises.

“The increasing use of Iranian crypto exchanges suggests that more individuals and institutions are resorting to crypto to safeguard wealth and circumvent financial restrictions,” Chainalysis said. “A closer examination of these outflows suggests they are not necessarily driven by illicit finance or state-sponsored activity, but rather by Iranian citizens’ deepening distrust in the government and a pressing need to move funds out of the country.”

The Iranian government tightly controls domestic crypto infrastructure, as evidenced by the sudden freeze on exchange withdrawals in December 2024 — designed to curb capital flight in response to a record decline in value for the Iranian rial, with inflation still hovering around 40-50%. Global compliance efforts have also reduced foreign crypto exchange exposure to Iranian services by 23% between 2022 and 2024.

Sanctioned jurisdictions and entities received $15.8 billion in cryptocurrency in 2024

The U.S. Treasury’s Office of Foreign Assets Control (OFAC) intensified its efforts to disrupt sanctioned activities in 2024, focusing on Russia’s wartime economy, illicit cyber activities and organized crime networks, as well as Iran’s growing crypto usage, moving beyond traditional banking. Despite this, sanctioned jurisdictions received $15.8 billion in cryptocurrency last year, making up 39% of total illicit crypto flows, according to Chainalysis’ data.

In contrast to prior years, jurisdictions made up nearly 60% of total sanctions-related activity by the end of 2024, surpassing individual entities, the firm noted. This was largely driven by Iran’s growing use of cryptocurrency and OFAC’s focus on targeting financial infrastructure supporting illicit activity rather than individuals and small groups, it said.

However, despite enforcement efforts, Russian-language no-KYC exchanges persist, with many re-emerging as rebranded services. Meanwhile, Russia and Iran have both sought alternative payment systems through BRICS partnerships and stablecoin-based trade to bypass Western sanctions, Chainalysis noted. In a shift from its prior stance, Russia also enacted legislation to legalize crypto mining and the use of cryptocurrency for international payment in 2024.

Tornado Cash endures despite legal action

Decentralized platforms like Tornado Cash also remain operational despite sanctions, complicating enforcement efforts. “Despite OFAC sanctions, legal action and the arrests of its developers, Tornado Cash continues to process illicit transactions,” Chainalysis said.

Sanctioned in 2022 for helping to facilitate the laundering of over $455 million in stolen funds — largely tied to North Korea's Lazarus Group — the platform's decentralized smart contracts have proven difficult to shut down. While transaction volumes initially dropped by nearly 90% after its web interface was taken offline, inflows rebounded by 108% in 2024. This was driven by a three-year high in stolen funds, which made up 24.4% of total inflows, with the $145 million HECO Bridge exploit contributing significantly to the increase, according to the analytics firm.

Although inflows haven't reached pre-sanction levels, Tornado Cash continues to process hundreds of millions of dollars in transactions each month.

Tornado Cash value received. Image: Chainalysis.

Despite its use in laundering illicit proceeds, it's important to note that Tornado Cash has also been used for legitimate privacy purposes, as demonstrated by Ethereum co-founder Vitalik Buterin's anonymous donation to Ukraine following Russia’s invasion in 2022.

In November 2024, a U.S. federal appeals court also ruled that OFAC had exceeded its authority by sanctioning Tornado Cash's smart contract addresses, raising questions about the limits of enforcement against DeFi protocols. A U.S. District Court then ordered the sanctions on Tornado Cash to be reversed in January. “Ensuring compliance without compromising the ethos of decentralization and privacy is an overarching challenge for an industry built on decentralized technology,” Chainalysis said.

Earlier this month, Chainalysis reported that funds lost to pig butchering scams soared 40% in 2024, while ransomware extortion dropped 35%.