In 2025, under the backdrop of the continuous deterioration of Iran's economic and political situation, a hidden yet clear flow of funds is emerging on the blockchain: a large amount of Bitcoin is flowing from exchange wallets to personal self-custody addresses. Offline, the reality is a mix of currency devaluation and protest sentiments, while online, cold data shows a continuous increase in withdrawal records and address activity. Coinciding with this scene is a statistic from Chainalysis reporting an Iranian local crypto ecosystem worth approximately $7.78 billion, along with a more glaring figure — addresses linked to the Islamic Revolutionary Guard Corps (IRGC) are said to have received over 50% of the cryptocurrency value within the country. On one end of the same infrastructure, the public is trying to "rescue" their assets from an out-of-control local currency and a restricted banking system, while on the other end, the state power structure is accelerating its capture of on-chain liquidity under the shadow of sanctions. This tug-of-war between civilian hedging demands and state control is pushing Iran into the spotlight of the global crypto narrative.
Uncontrolled Rial and Street Protests Heighten Risk Perception
In Iran, the continuous devaluation of the rial is no longer just an abstract concept at the macroeconomic level; it is directly tearing at household balance sheets through soaring prices and shrinking purchasing power. For ordinary savers, deposits denominated in local currency are visibly shrinking every day, and cash and bank accounts no longer signify "safety," but rather resemble a slowly deflating asset burden. In this environment where psychological expectations have completely turned pessimistic, any tool that can carry cross-border value and is not directly controlled by the local banking system will quickly gain attention and tentative use.
Alongside economic anxiety, there is a growing accumulation of street protests and political uncertainty. The ongoing social tension has weakened people's trust in traditional finance and institutional stability, leading the public to question whether banks can guarantee withdrawal freedom in extreme situations, and even worry about account freezes or further capital controls. It is precisely within this overlapping time window of multiple uncertainties that the expansion of local crypto usage coincides with the worsening situation: the increase in on-chain address activity and the trend of transaction paths extending from local to foreign reflect the emotional response to institutional risks offline.
At the same time, local regulations in Iran regarding capital outflow and cross-border payments have made traditional channels narrow and expensive in practice. The difficulty of obtaining foreign exchange and the tightening scrutiny of the formal financial system have forced individuals and small businesses wishing to "offshore" part of their assets to seek pathways that do not rely on bank approvals. In a reality with limited options, cryptocurrencies like Bitcoin, with their permissionless transfer mechanisms and global convertibility, have been pushed to the forefront from the bottom up, becoming one of the few remaining avenues for value export.
From Exchanges to Cold Wallets: The Privatization of Bitcoin as a Hedging Path
When a large amount of Bitcoin is observed flowing from exchange addresses to personal wallets on-chain, the implications go far beyond a simple "change in trading habits." For Iranian users, transferring assets out of platform accounts means technically severing dependence on third-party custodians, and psychologically completing a self-soothing act of "detaching assets from the local system." Holding private keys outside of exchanges allows them to believe that even if the domestic regulatory environment fluctuates dramatically or certain platforms are restricted, they still possess the last means of cross-border value transfer.
Multiple crypto media and research institutions have reported that "Bitcoin is viewed as the preferred hedging asset in this crisis." The spread of this statement not only reflects the judgments of market observers but has also been internalized into a narrative among the Iranian public: the rial represents uncertainty and devaluation, while Bitcoin symbolizes a "digital safe" that can cross borders and hedge against inflation and local risks. In a context where exchange rates and price expectations continue to deteriorate, and banks are seen as "extensions of the system," this narrative easily gains trust and spreads.
Compared to continuing to hold rials or bank deposits, the preference of the Iranian public for self-custodied Bitcoin primarily stems from three considerations. First, the erosion of sovereign credit leads to a discount expectation for any nominal asset denominated in local currency; second, there is skepticism about the banking system's ability to withstand crises, with fears of withdrawal restrictions or account freezes in extreme situations; finally, the symbolic significance of Bitcoin as a means of "escaping the local system" through self-custody gives holders the feeling that they possess a value container that can be taken offline, cross-border, or even migrate across systems at any time. This psychological sense of security often amplifies in times of macroeconomic turmoil.
This wave of withdrawals has also triggered a chain reaction among local crypto service providers and the on-chain ecosystem in Iran. The decline in custodial balances on platforms has driven more users to learn how to use non-custodial wallets and hardware wallets, leading to an increase in demand for technical education and related services. In terms of on-chain activity, the number of personal addresses has increased, and the transfer paths have become more decentralized, causing the visible form of fund flows to shift from concentrated platform accounts to fragmented personal nodes, further increasing the density of "noise points" in the global on-chain map of the Iranian region.
Behind the $7.78 Billion Scale, Infrastructure and Power Coexist
According to the Chainalysis report, the scale of Iran's cryptocurrency ecosystem in 2025 is approximately $7.78 billion. In a horizontal comparison among emerging markets globally, this figure is not the highest, but it stands out particularly in the context of a country under severe sanctions and with a constrained financial system. It indicates that within an economy partially isolated from the traditional financial system, a parallel value network, carried by on-chain addresses and private keys, has developed to a scale that is statistically significant and traceable.
This $7.78 billion is not a balance of a single entity but is dispersed across multiple groups and scenarios. Ordinary users, represented by retail investors, view it more as a store of value against inflation and exchange rate risks; over-the-counter merchants and small import-export participants use it as a settlement medium to bypass certain cross-border payment obstacles; local miners, constrained by energy and equipment costs, convert local resources into digital assets that can circulate in the global market by producing and selling Bitcoin. In the interplay of these different roles, the same set of crypto infrastructure serves multiple functions, including value preservation, payment, clearing, and asset conversion.
The contradiction lies in the fact that this infrastructure is used by the public to hedge against inflation and bypass financial blockades under sanctions, while it is also exploited by the power structure. In a sanctions environment, any remaining open funding channels are quickly identified and partially taken over by the state and its affiliated entities, and the crypto network is no exception. Thus, on the same chain, there are individuals attempting to rescue household savings from local currency risks, as well as power institutions seeking to complete fund dispatch outside the traditional financial system; they share the same set of protocols and nodes but possess vastly different resources and discursive power.
This gives crypto in turbulent countries a near "financial public utility" attribute: anyone can access, use, and transfer, yet there is no universally trusted public transparent governance mechanism. The openness of the protocol layer obscures the reality of the asymmetry of fund usage rights and information, making it difficult for ordinary users to know how much of the traffic they rely on is being siphoned off by the power structure or to what extent it reinforces the existing power dynamics.
IRGC Consumes Over Half of the Funds, Hedging and Power Entangled on the Same Chain
Amid this infrastructure that already exhibits characteristics of a public utility, the presence of the Islamic Revolutionary Guard Corps (IRGC) is particularly striking. Multiple research and media outlets citing data from Chainalysis indicate that IRGC-related addresses have received over 50% of the cryptocurrency value within Iran. For a core national security institution that is heavily sanctioned and constrained within the traditional cross-border settlement system, the implications of this figure are self-evident: crypto assets have become one of the indispensable tools for conducting cross-border or domestic fund dispatch.
Under the constraints of severe sanctions, the IRGC's use of the crypto network for some fund flows has clear practical motivations. On one hand, on-chain assets can bypass parts of the traditional interbank clearing system and compliance checks, providing greater concealment and operational space for specific funding arrangements; on the other hand, domestic and foreign supporters, affiliated entities, or partners can also use crypto assets to complete a certain degree of value transfer without having to expose themselves to easily interrupted banking channels each time. As a result, the crypto network provides a parallel funding dispatch channel for such national security-related entities.
The problem is that civilian hedging funds and national security system funds are entangled on the same chain. Ordinary Iranians view Bitcoin as a "lifeline" to escape local currency and financial controls, while power entities like the IRGC see it as a tool to extend their reach under the sanctions fence. For external observers and potential adversaries, identifying and separating these two types of funds is nearly impossible; the on-chain transaction records are technically unified, yet the intentions and consequences of the value flows are vastly different.
More sensitive is the controversy surrounding regulation and compliance. Currently, whether the IRGC's receipt of over 50% of the domestic crypto value constitutes illegal fund movement remains classified as information pending verification. Existing data reveals the concentration of traffic rather than providing direct judicial characterization. In the absence of transparent, authoritative official information and a complete chain of evidence, equating such behavior simply with some form of illegal activity is irresponsible and easily weaponized by various narratives. It is certain that the openness and neutrality of crypto infrastructure make it difficult to resolve this real dilemma through simple "bans" or "cuts."
The Myth of Bitcoin as a Hedge and the Statistical Trap of Geopolitics
In the discourse of the global crypto market, "geopolitical tensions increase Bitcoin hedging demand" has almost become a common saying. Whenever there is an escalation of conflict, an increase in sanctions, or a political crisis in a region, market narratives often quickly link Bitcoin price fluctuations and rising on-chain activity with "hedging buying." The case of Iran provides a wealth of material to cite: currency devaluation, the spread of protests, tightening capital controls, and the expansion of crypto usage coincide with the time window of the Bitcoin withdrawal wave, appearing to form a complete causal chain.
However, directly equating this temporal overlap with a one-way causation of "geopolitical tensions leading to increased Bitcoin hedging demand" carries significant risks. First, there is currently no precise statistic on the specific scale of Bitcoin withdrawals in Iran in the public data; research institutions provide estimates more on the overall scale of the crypto ecosystem and the distribution of funds. Second, the relationship between price fluctuations, on-chain activity, and real fund migration is not a simple linear one: price increases can also attract speculative trading and short-term games, thereby amplifying on-chain activity, rather than being driven entirely by hedging demand.
From a statistical perspective, Iran resembles a sample magnified under extreme conditions, rather than being direct evidence that can be extrapolated as a global norm. Variables such as the intensity of sanctions, the speed of local currency credit collapse, domestic regulatory methods, residents' financial literacy, and access to technology vary greatly between countries. Simply summarizing "a crisis occurs in a certain place — on-chain activity in Bitcoin rises" as a universal law easily overlooks sample selection bias and observational window bias: we often only observe data at the most intense moments of conflict and highest media attention, while rarely systematically comparing control samples from regions with milder crises or lower crypto penetration.
Therefore, when reading various versions of the "hedging myth," it is necessary to deliberately distance the price curve, on-chain data, and macro events from each other, to examine their connections in a more restrained manner: which are driven by real fund migration, which are amplified by speculative sentiment and liquidity, and which are merely coincidences in time that have been given meaning by post-event narratives. The on-chain trajectory of Iran provides an important clue, but elevating it to the conclusion that "there is a stable positive correlation between geopolitics and Bitcoin hedging demand" is still far from sufficient.
The Paradox of a Lifeline for the Public or a New Armor for Power
Returning to the specific case of Iran, the role of Bitcoin is distinctly dualistic. On one hand, it serves as a "lifeline" for countless ordinary people attempting to resist currency devaluation and financial controls, providing a potential escape route for household assets through self-custody and cross-border transferability; on the other hand, when power entities like the IRGC receive and manage over half of the domestic crypto value on the same network, this chain simultaneously becomes a "new armor" for the power structure to reinforce itself in a sanctions environment. The coexistence of the lifeline and the armor on the same set of protocols is where the tension in the Iranian case lies.
From this point, it becomes difficult to explain the spillover effects of crypto infrastructure in other high-inflation, high-sanction countries with a single narrative. In certain contexts, it indeed provides the public with a real option to bypass capital controls and protect assets; in other contexts, it is inevitably absorbed by the power structure, becoming a tool to consolidate the existing order or extend its duration. The same chain and the same type of assets, in the hands of different participants, point to entirely different outcomes, and this multiplicity makes any simple narrative of "liberation" or "oppression" inadequate to fully cover the facts.
Looking ahead, as the tools of sanctions become more refined, compliance requirements escalate, and on-chain analytical capabilities improve, the crypto ecosystem will face sharper regulatory and ethical scrutiny. On one hand, on-chain transparency provides an unprecedented technical foundation for identifying suspicious fund flows, and regulatory and law enforcement agencies in various countries are attempting to convert this transparency into advantages for compliance and sanction enforcement; on the other hand, if such regulation merely imposes a blanket crackdown on fund flows from high-risk areas at the on-chain level, it may further squeeze the space for ordinary people to protect themselves through crypto. Finding a viable balance between combating abuse and protecting individual financial freedom will determine whether crypto infrastructure in a turbulent world is closer to a public good or more like a toolbox for a select few.
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