Two blockchain analysis companies have reported a significant increase in funds flowing out of Iranian cryptocurrency exchanges in the hours following the attacks on Iran by the United States and Israel last Saturday, February 28. However, researchers added that they are unable to ascertain the specific reasons behind these fund outflows.
According to Chainalysis, a blockchain research company based in the United States, the amount of funds flowing out of Iranian cryptocurrency exchanges sharply increased to over $2 million within an hour of the attacks commencing from around 6:15 GMT on Saturday.
Another UK-based blockchain research company, Elliptic, stated that during the hours of 11:00 to 12:00 GMT on Saturday, the fund outflow from Nobitex, Iran’s largest cryptocurrency exchange, peaked at $2.89 million, which was eight times higher than the previous day’s peak hourly outflow.
Data from Chainalysis revealed that a total of $10.3 million worth of cryptocurrencies flowed out from Iranian cryptocurrency exchanges between last Saturday and this Monday.
Blockchain researchers noted that these data provide a glimpse of the increasing importance of cryptocurrencies in Iran. Cryptocurrency activities in Iran often see a sharp rise following local geopolitical impacts.
While estimations may vary among different institutions, researchers suggested that with both state actors and retail investors turning to digital currencies, Iran’s cryptocurrency trading volume could reach $8 to $11 billion by 2025.
Earlier in February, Reuters reported that the U.S. was investigating specific cryptocurrency trading platforms for potentially facilitating Iranian officials to evade sanctions.
Cryptocurrency wallets use pseudonymous addresses recorded as a string of letters and numbers on the blockchain, making it challenging to determine the entities behind the transactions. Chainalysis stated that it is unclear who transferred the funds in the past few days and what the reasons behind them are.
“It is almost certain that a part of these fund movements involves ordinary Iranians transferring funds to cope with escalating risks,” noted Chainalysis. “Other possibilities include exchanges readjusting liquidity, attempting to reduce visibility of their on-chain activities, or government-aligned actors using mainstream platforms to transfer funds.”
Elliptic reported that initial tracking shows these funds are flowing to overseas cryptocurrency exchanges, potentially indicating capital flight from Iran. Another U.S.-based blockchain research company, TRM, in an email to Reuters, mentioned that the fund movements from Nobitex “seem to reflect activities under pressure rather than evidence of systematic capital flight.”
The International Monetary Fund (IMF) highlighted that cryptocurrencies still have a relatively small share in the global financial system but are expected to increase in usage, especially in emerging markets with weakening currencies.
(Reference: This article drew insights from Reuters reports)