Crypto has become part of Iran’s arsenal

Crypto enters the economic war
There is a new documentary out called “Everybody Is Lying to You for Money,” directed by the actor and crypto skeptic Ben McKenzie. McKenzie spends the entire length of the film arguing that crypto is nothing but a scam, only to declare at the end that nothing he did made much of a difference. He was convinced that he was right, he watched FTX and Celsius collapse, but somehow it didn’t matter.

Processing Content

There are of course countless frauds in the crypto world, as McKenzie keeps insisting, but that isn’t the actual issue. The actual issue is that crypto has some very powerful incentives that make it extremely useful to certain people. The Iran war provides the latest example of that.

Iran is using the stablecoin tether and its own digital exchanges to run a toll service in the Strait of Hormuz (I keep saying this is an economic war, and it keeps getting truer and truer), as our Carter Pape reports. Iran used these rails to collect $3 billion last year and $2 billion the year before that. Now they are charging tankers as much as $2 million a pop to cross the strait, and demanding the payment in crypto.

Some of you may be thinking that this is all just something happening halfway around the world. But the same rails facilitating those payments have also been used to move more than $7 billion out of U.S. bank accounts held by Americans who were victims of crypto frauds. And that was in 2025 alone. In other words, the pipes being used by the Iranians are already directly touching U.S. banks. “Pig butchering and Iran’s crypto payment rails share a stablecoin issuer, offshore exchange category and correspondent-banking rails,” Carter wrote in his story. What that means, at the very least, is that U.S. banks will probably have more compliance responsibilities put on them.

If what Iran is doing works, it will only increase the use of crypto to get around sanctions. The Iranian exchanges, which have been directly linked to Iran’s powerful Islamic Revolutionary Guard Corps, are already on the sanctions list. But it doesn’t really matter. The sanctions list really means that anybody getting caught doing business with the Iranians could get into legal trouble, in the U.S. When everybody needed dollars because there weren’t any alternatives, that was a powerful disincentive. If the Iranians can use crypto to thumb their nose at the U.S. both economically and militarily, it will show that there’s a viable alternative to soft-dollar power.

This has been a long time coming. Some academics at Harvard and MIT played out a war game back in 2019 that imagined how a Chinese-backed cryptocurrency could wreak havoc with the U.S. sanctions regime against North Korea. The set-up was a crisis where North Korea was using China’s crypto to get around U.S. sanctions and get the money to develop more powerful missiles. The scenario was designed to show that in one possible future, crypto could give sanctioned actors a path around the dollar and the sanctions. The players were different from what’s happening in the strait, but the issue is the same. What was an academic exercise seven years ago is real today.

All of this cuts against another theme we’ve been writing about lately, namely the desire for more real-time instant settlements. What this Iran story shows about those slow, plodding settlements is that sometimes there’s a good reason for payments to be slow and plodding. As in, you have the time to make sure they are legitimate. But I’m not sure what the solution here is. The genie is out of the bottle. Pandora has opened the box. The worms have escaped the can. The U.S. government can try to control the crypto on- and off-ramps – i.e., banks, i.e., you – but that won’t be easy. As I’ve noted previously in this space, the cost of creating a new cryptocurrency is exactly zero; it’s all open-source software. The potential gain is effectively unlimited. The incentives are becoming more powerful than the disincentives. The Hormuz-toll gambit may be the most consequential proof of concept of the power of cryptocurrencies that has been run.