The use of cryptocurrencies in sanctioned countries, especially Iran, has increased significantly in 2024, according to a report by Chainalysis. Iranians see cryptocurrencies as financial alternatives in the midst of geopolitical tensions. Crypto transactions between entities and sanctioned countries reached $15.8 billion in 2024, with Iran leading in the use of cryptocurrencies between US-sanctioned jurisdictions.
- Crypto transactions between entities and sanctioned countries reached $15.8 billion in 2024
- Iran leads in the use of cryptocurrencies between the jurisdictions sanctioned by the US
- Capital escape and distrust of the government promote interest in cryptocurrencies among Iranians
- The OFAC intensified efforts, but services such as Tornado Cash continue to challenge the sanctions
The report by Chainalysis details how cryptocurrency activity in countries sanctioned by the US government grew during the past year to represent almost 40% of the total illegal cryptocurrency transactions. During 2024, jurisdictions and entities sanctioned by the Office of Foreign Assets Control of the US Department of the Treasury received $15.8 billion in cryptocurrency transactions, representing 39% of all illegal cryptocurrency activity in the period.
More than people and entities sanctioned, the nations on the OFAC blacklist were the ones that most committed to the use of cryptocurrencies during the year – especially Iran. Iranians are turning to cryptocurrencies in the midst of a political crisis, with centralized exchanges recording an increase in both use and outputs, suggesting capital escape. Transaction patterns on Iranian cryptocurrency platforms were closely correlated with geopolitical events, such as Iranian missile launches and decreased government confidence.
The persistent devaluation and lack of access to global banking systems force people and companies to explore alternative financial options. A more detailed examination of the outputs suggests that they are not necessarily driven by illicit finances or activities sponsored by the state, but by Iranian citizens who distrust the government and have a pressing need to get funds out of the country. For many Iranians, cryptocurrencies represent an alternative financial system, and the growing use of Iranian cryptocurrency exchanges suggests that more individuals and institutions are resorting to digital currency to safeguard wealth and avoid financial restrictions.
The OFAC intensified its efforts to interrupt economic activities between entities and sanctioned jurisdictions in 2024, focusing on the Russian war, illicit cyber activities, and organized crime networks. However, the activity of cryptocurrencies among sanctioned nations grew to represent almost 60% of the total activity related to sanctions by the end of 2024, surpassing individual entities. This was largely driven by the growing use of cryptocurrencies by Iran.
Despite sanctions, services like Tornado Cash remain operational, complicating enforcement efforts. These services, criticized for their use in laundering stolen funds or avoiding sanctions, are difficult to shut down because they operate through smart contracts on a decentralized blockchain. Tornado Cash was sanctioned in 2022 for helping to facilitate the laundering of over $455 million in stolen funds, largely linked to the Lazarus group of North Korea. However, a US court recently ordered that the sanction against the mixer be reversed after a Federal Court of Appeals ruled that the OFAC had exceeded its authority when it sanctioned Tornado Cash’s smart contract addresses.