4 Ways Iran and Its Allies Spend Cryptocurrency To Fund Terror

Crypto technology is a powerful tool that the intelligence agencies and shadow companies of the Islamic Republic of Iran (IRI) use to fulfill the following goals:

1. Pays proxies in the Middle East 

Two years before the October 7, 2023, massacre, the Islamic Republic started using crypto technology to transfer funds to Hamas. Part of this payment was used to fund the massacre and the ensuing war, which lasted two years. 

Crypto technology has been a godsend for Iran because until now, transferring money to terrorist organizations has been a major challenge for the Islamic Republic's rulers. For example, to get money to Hamas, they've had to send people all the way to Sudan, and from there to the Sinai desert. And from there, the carriers had to carry suitcases of cash through the tunnels into the Gaza Strip. This entailed all sorts of risks, such as being caught. Or the carrier might take all or some of the cash. But transferring money by crypto fixed many of these problems. With crypto, IRI operators can count every cent that they send, and Hamas receives. Additionally, the anonymity of crypto makes it more difficult for the perpetrators to be traced and arrested. 

2. Facilitates payment for the sale of narcotics 

Cryptocurrencies also benefit the drug trafficking activities of Iran's allies, especially Hezbollah. Over many years, Hezbollah has been growing and exporting illicit drugs in Venezuela, assisted by the Venezuelan government. Its principal export markets have been the United States and the European Union. Venezuelan officials and Hezbollah share the income from the sale of these illicit drugs. To facilitate payment for the sale of their narcotics, Hezbollah and the Venezuelan government have relied on crypto technology. Such technology has provided them with a very important lifeline as both parties are very reliant on the income from the sale of illicit drugs. Crypto's safety and anonymity in Hezbollah's drug trade also help Iran. The more money Hezbollah can earn from the sale of narcotics, the less it will have to rely on Iran for financial help. This is crucial for the Islamic Republic these days. Major problems such as inflation, power outages, and water shortages plague its economy and its population.   

3. Bypasses sanctions

The Islamic Republic of Iran is one of the most heavily sanctioned countries in the world. There are very few banks that will deal directly with Iran’s banks. There are even fewer countries that will pay the Islamic Republic directly for the purchase of its oil. Yet crypto technology has enabled the Islamic Republic to get around this problem, with some success. In fact, we could say that crypto technology has been one of the major reasons behind the IRI’s ability to withstand the current sanctions against it. 

Until recently, the IRI used the same methods to supply money to its terror proxies, to receive money for the sale of its oil. Meaning suitcases full of cash, or intermediaries. With the latter, the intermediaries charged the IRI ‌hefty commissions because of the risks involved. IRI officials had no other option but to pay, thus significantly reducing the profit margin for the sale of its oil. This was a major cost to the regime, as oil is its biggest export. The few countries that are still willing to purchase its sanctioned oil are doing so after receiving a notable discount. Last, any individual who undertook payments on behalf of the Islamic Republic had to be suspected by the Iranian regime. Because foreign intelligence agencies, especially those of the US and Israel, could recruit them. However, cryptocurrency has largely solved these issues. Because it offers a direct and anonymous method of payment for the sale of its sanctioned oil. 

4. Pays spies 

To date, the domestic Israeli Security Agency SHABAK has arrested at least 30 Israelis on suspicion of spying for the IRI.  

This is a tremendous achievement for Iran’s intelligence services. Crypto technology has played a big part in the success.  

There are no diplomatic relations between Iran and Israel. This makes it extremely difficult for Iranian intelligence operatives to pay their agents, as there are no Iranian banks or even flights between the two countries. Crypto technology solved this problem as it offers a relatively safe and anonymous direct payment channel to Iran's operatives in Israel. 

The use of crypto technology was critical; otherwise, the intelligence agencies of the IRI would have faced substantial difficulty in recruiting the Israelis for spying. Reports suggest that most of the arrested Israelis did not have access to valuable intelligence. Nevertheless, their sheer number has provided Iranian intelligence with ‌unprecedented‌ access to Israeli territory. 

Iranian intelligence's use of crypto technology presents threats we cannot ignore. It boosts the financial capabilities of terrorist organizations and drug gangs. More than ever, the international community should increase regulation and oversight to make crypto as transparent as possible. As crypto technology becomes more transparent, it will be less useful for terrorists, drug traffickers, and others backed by the IRI.

---

Dr. Meir Javedanfar is an Iranian-Israeli lecturer, author, and commentator. He teaches various Iran-related courses at Reichman University in Herzliya, Israel. 

His X handle @Meirja.