US-Israeli Conflict Threatens Iran Sanctions Regime Stability

US Sanctions on Iran Show Signs of Ineffectiveness as Alternative Payment Methods Gain Traction

A recent report by Chainanalysis reveals a significant increase in cryptocurrency flows to sanctioned entities, with the value rising 694 percent to a record $154 billion in 2025. This trend is attributed to the growing reliance on alternative payment methods, including de-dollarization and barter arrangements.

The US has been at the forefront of using sanctions as a tool for foreign policy, despite warnings from sociologists and political scientists that such measures often harm citizens rather than governments. The ongoing conflict with Iran has highlighted the limitations of these punitive measures.

One key factor contributing to the ineffectiveness of US sanctions is the dominance of the US dollar in global trade. Sanctioned states are unable to conduct sanctioned trade due to the requirement for payments to be processed in dollars. However, the spread of cryptocurrency has provided an alternative solution.

Iran has heavily relied on cryptocurrency for financial transactions over the past few years, with the Islamic Revolutionary Guard Corps (IRGC) accounting for 50 percent of value received in the final quarter of 2025. The report also notes that Iran converts cryptocurrency holdings into renminbi, which is then used to buy Russian goods or conduct trade across Asian markets.

The war on Iran has expanded the pool of economic actors willing to use cryptocurrency to deal with the Iranian state and entities. The country’s recent demand for transit tolls from vessels navigating the Strait of Hormuz, payable in Bitcoin or renminbi, has shown that alternative payment methods are gaining traction.

China is also playing a significant role in this trend, as it has become one of the biggest buyers of Iranian oil, paying in its own currency. Other countries have also started using the renminbi, with 30 percent of China’s external merchandise trade paid for in its currency in 2024.

The use of cryptocurrency and renminbi is part of a broader alternative financial architecture that is being accelerated by the conflict. Beneath the on-chain economy lies a more informal but equally significant set of mechanisms – hawala networks and barter arrangements – that are gaining mainstream acceptance.

Source: Al Jazeera