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Iran, Russia and North Korea — all under sweeping US economic sanctions — are rapidly expanding their use of virtual assets to bypass the international financial system. Cryptocurrency is now being used not just for investment and payments but to collect oil revenues, procure weapons and fund military operations, analysts say, making digital assets an increasingly disruptive force in global finance and geopolitics.

Blockchain analytics firm Chainalysis estimated that virtual asset wallet addresses linked to US-sanctioned entities received about $100 billion last year, according to the Wall Street Journal on Friday. That figure represents roughly an eightfold increase from the previous year.

Analysts say the more alarming development is not the sheer volume of transactions but the breach it represents in the dollar-centered financial sanctions architecture the United States has built over decades. Washington has long used its control over the SWIFT interbank messaging network and dollar payment channels to effectively cut sanctioned countries off from international finance. Blockchain-based virtual assets, however, allow funds to move across borders without passing through any bank, undermining that system.

The spread of stablecoins and blockchain payment infrastructure worldwide has accelerated the formation of independent transaction networks that bypass traditional financial channels. Sanctioned countries move funds across borders in virtual assets and then convert them into local currencies through domestic exchanges or over-the-counter trading desks, according to sources familiar with the matter.

Iran's Islamic Revolutionary Guard Corps has used domestic and overseas cryptocurrency exchanges to collect oil payment proceeds from China, its largest oil buyer, sources said. Hamas, the Palestinian militant group designated a terrorist organization by the United States, has also solicited cryptocurrency donations via Telegram and other channels. The FBI obtained intelligence on Hamas's virtual asset fundraising methods through informants, according to reports.

Russia has grown more systematic in its use of virtual assets since Western financial sanctions intensified following the war in Ukraine. Sanctioned Russian state bank Promsvyazbank and Ilan Shor — a pro-Russian businessman from Moldova — reportedly issued a ruble-pegged token called "A7A5" last year for use in overseas payments. Funds converted from the token into stablecoins were traced to payments made to Chinese drone manufacturers. A7A5's total transaction volume last year is estimated to have exceeded $90 billion.

Western intelligence agencies assess that North Korea launders virtual assets stolen through large-scale hacking and other cybercrimes, then uses the proceeds to purchase fuel and military equipment and to fund its nuclear and missile programs. The international community's focus on sanctioning North Korea's cryptocurrency hacking operations stems directly from efforts to cut off that funding pipeline.

As cryptocurrency becomes a state-level tool for sanctions evasion, analysts say the fundamental nature of digital assets is changing. Once viewed primarily as a speculative investment vehicle or an emerging technology, virtual assets are now evolving into what some describe as a "geopolitical asset" — one that shapes economic sanctions and national security strategy between countries.

"Cryptocurrency has fundamentally changed how international sanctions are evaded," said Caitlin Martin, a senior intelligence analyst at Chainalysis.

The United States is stepping up its response. Last month, Washington sanctioned four cryptocurrency exchanges, including Nobitex, Iran's largest virtual asset exchange. Treasury Secretary Scott Bessent said the US had seized approximately $1 billion in virtual assets linked to Iran.

However, experts warn that blocking individual exchanges or wallet addresses is insufficient to sustain sanctions pressure, given the nature of the blockchain ecosystem. When one exchange is shut down, new wallets and platforms emerge quickly, they say, making an ongoing game of cat and mouse between regulators and sanctioned actors all but inevitable.

"The Iranian platforms recently sanctioned by the United States are just the tip of the iceberg," said Ari Redbord, head of policy at TRM Labs, which tracks Iran's virtual asset transactions. "Removing visible nodes does not dismantle the transaction networks that have formed beneath them."

Industry observers expect the episode to refocus global digital asset policy debates on security and international financial order. While many countries have been moving quickly to institutionalize stablecoins and promote digital asset development, the need for international coordination and a robust regulatory framework to block sanctions evasion and illicit fund flows is becoming equally urgent, analysts say.


attom@heraldcorp.com