Iran Turns to Cryptocurrencies and BRICS to Bypass Sanctions

Context:

• Iran is exploring the use of cryptocurrencies to conduct trade with BRICS nations, including India, to circumvent U.S. and UN sanctions.

• Sanctions have sharply curtailed Iran’s access to global financial infrastructure, particularly the SWIFT system, compelling it to seek alternative payment mechanisms.

Key Highlights:

Sanctions-Induced Financial Isolation

• Since 1979, Iran has faced progressively stricter sanctions, targeting:

  • Banking sector

  • Oil exports

  • Foreign exchange flows

• These sanctions have:

  • Blocked access to SWIFT

  • Severely constrained trade settlement

• In August 2025, France, the UK, and Germany re-imposed sanctions using the snapback mechanism linked to Iran’s nuclear programme.

Why Cryptocurrencies Appeal to Iran

• Cryptocurrencies:

  • Enable peer-to-peer transactions outside state-controlled banking systems

  • Are harder to monitor or block through conventional sanctions

• Iranian leaders view crypto as:

  • A sanctions-resilient payment tool

  • A means to sustain trade in oil, goods, and services

• Parliament Speaker Mohammad Baqer Ghalibaf described crypto adoption as a “necessity” under sanctions.

BRICS and De-Dollarisation

• BRICS nations are increasingly exploring:

  • Local-currency trade

  • Blockchain-based settlement systems

• Crypto aligns with BRICS’ broader objective of:

  • Reducing dependence on the US dollar

  • Promoting a multipolar financial order

• Proposals include:

  • A BRICS settlement token

  • Blockchain-based trade clearing platforms

Iran’s Push at deBlock Summit

• Iran hosted the deBlock Summit, signalling readiness to:

  • Integrate blockchain and crypto into trade systems

  • Attract partnerships with BRICS-linked entities

• Experts highlighted:

  • Blockchain’s ability to support sanctions-resistant contracts

  • Potential for greater transparency and trust in trade

Domestic Regulatory Challenges in Iran

• Iran’s crypto ecosystem remains poorly regulated:

  • Crypto–Rial conversion gateways blocked

  • Exchanges face restrictions

  • Mining permitted but controversial due to high energy use

• Private-sector concerns:

  • Inconsistent and opaque regulations

  • Lack of legal certainty discouraging investment

• Lawmakers question:

  • Whether public electricity subsidies should support energy-intensive crypto mining

  • Risks of money laundering and financial instability

Strategic and Governance Dilemmas

• Iran faces a policy trade-off between:

  • Using crypto to bypass sanctions

  • Managing risks related to:

    • Illicit finance

    • Energy security

    • Regulatory credibility

• Success depends on:

  • Clear legal frameworks

  • Trust-building measures like smart contracts

  • Coordination with willing trade partners

Implications for India and Global Order

• For India:

  • Raises questions about sanctions compliance

  • Intersects with India’s role in BRICS financial reforms

• Globally:

  • Highlights how digital currencies challenge traditional sanction regimes

  • Signals potential shifts in international economic governance

UPSC Relevance (GS-wise):

GS 2 – International Relations

• Sanctions diplomacy and geopolitical leverage

• BRICS and global financial multipolarity

• India’s balancing role in sanctioned economies

GS 3 – Economy

• De-dollarisation trends

• Cryptocurrencies in international trade

• Risks and regulation of digital finance

Prelims Focus:

• BRICS objectives

• Impact of sanctions on SWIFT access

• Role of cryptocurrencies in cross-border payments

Mains Enrichment:

• Analyse whether cryptocurrencies can meaningfully weaken sanctions regimes.

• Discuss the implications of BRICS-led de-dollarisation efforts for global financial stability and India’s interests.

---