Iraq is one of only ten countries worldwide that have completely banned cryptocurrency. Unlike most nations that are trying to regulate digital assets, Iraq's Central Bank of IraqThe central banking institution of Iraq responsible for monetary policy and financial regulation. has enforced a strict cryptocurrency ban since 2017. But why? And what does this mean for people living there? Let's break it down.
Legal foundations of Iraq's crypto ban
In November 2021, the Central Bank of Iraq issued Circular No. (125/5/9), which explicitly prohibits all banks, financial institutions, and payment service providers from handling cryptocurrencies. This was reinforced in March 2022 with a directive aligning with Financial Action Task Force (FATF)An intergovernmental organization that sets standards for combating money laundering and terrorist financing. recommendations. The 2022 rules required financial institutions to update internal policies, conduct enhanced due diligence, and block payment cards or e-wallets for crypto transactions. Iraq's ban is unique in its scope-unlike countries that only restrict institutions, Iraq's rules directly target consumer-facing services like digital wallets.
Why Iraq banned cryptocurrency
Behind the ban lies serious economic instability. Only 8.8% of Iraq's total money supply is held in bank deposits, meaning most citizens don't trust the banking system. The government struggles to cover monthly budget needs of 18-20 trillion dinars. In 2021, the Iraqi dinarThe official currency of Iraq, which was devalued in 2021 from 1,182 to 1,450 per US dollar. was devalued by 23%, causing food prices to surge and sparking public protests. The Central Bank claims cryptocurrency worsens financial volatility, though critics argue the real problem is Iraq's broken banking infrastructure.
Religious authorities also support the ban. The Kurdistan Regional Government (KRG)The autonomous regional government in northern Iraq, which issued a religious ruling against OneCoin in 2018. issued a fatwa against OneCoin in 2018. OneCoin was later exposed as a massive fraud scheme, with its founders charged in international courts. This religious ruling added cultural weight to the government's stance, making it harder for people to accept cryptocurrency.
The CBDC alternative
While banning private cryptocurrency, Iraq is developing a state-controlled Central Bank Digital Currency (CBDC)A state-controlled digital version of the Iraqi dinar, currently in research phase as of 2025.. In March 2025, financial advisor Mazhar Mohammed Saleh announced the project, saying it would "reduce cash leakage," "cut printing costs," and "help fight money laundering." However, human rights groups warn this could enable mass surveillance. Iraq scores just 4.38/10 on civil liberties, and the government already arrests people for social media comments. A CBDC would put all financial transactions on government databases by default.
Enforcement gaps and underground trading
Despite the ban, informal crypto trading continues across Iraq. People use peer-to-peer platforms or underground networks to buy and sell digital assets. There's no specific law against holding crypto personally-only using banks or payment services for it. This creates a gray area where enforcement is inconsistent. Some users trade without issues, while others face money laundering investigations if authorities suspect illegal activity. The Central Bank's risk-based guidance manual focuses on financial institutions, leaving individuals in legal limbo.
How Iraq compares to other countries
| Country | Regulatory Status | Key Restrictions | Enforcement Approach | Crypto Adoption Index Rank |
|---|---|---|---|---|
| Iraq | Complete ban | Banks and financial institutions prohibited from crypto transactions; payment cards and e-wallets banned for crypto | Enforcement against individuals inconsistent; no specific criminalization of personal crypto use | N/A (no legitimate activity) |
| China | Strict restrictions | Banned financial institutions from crypto transactions; mining prohibited since 2021; exchanges illegal | Aggressive enforcement against institutions; individuals can hold crypto but face risks | 20th (Chainalysis 2024) |
China ranks 20th in Chainalysis' 2024 Global Crypto Adoption Index despite strict rules. Iraq, however, has virtually no legitimate crypto activity. Neighboring countries like the UAE have licensing frameworks for crypto exchanges, but Iraq chose total prohibition. The OneCoinA fraudulent cryptocurrency scheme exposed as a massive scam in 2017, leading to international criminal investigations. scandal reinforced Iraq's distrust of digital assets. OneCoin's founders were charged with fraud, and the project turned out to be a pyramid scheme.
Is cryptocurrency illegal in Iraq?
Yes, the Central Bank of Iraq bans all financial institutions from handling cryptocurrency. While holding crypto privately isn't explicitly illegal, using banks or payment services for transactions is prohibited. Enforcement against individuals is inconsistent, but you could face money laundering charges if authorities suspect illegal activity.
Why did Iraq ban cryptocurrency?
The Central Bank cites risks like financial crimes, market volatility, and consumer protection. Iraq's economy is fragile, with only 8.8% of money supply in bank deposits and a devalued dinar. The government views cryptocurrency as a threat to financial stability, though critics say the real issue is the banking system's weakness.
What is Iraq's Central Bank doing about digital currency?
In March 2025, the Central Bank announced plans for a state-controlled Central Bank Digital Currency (CBDC). It aims to replace paper money, reduce printing costs, and improve financial tracking. However, human rights groups warn it could enable mass surveillance, especially given Iraq's low civil liberties scores.
How does Iraq's crypto ban compare to other countries?
Iraq is one of only ten countries with a total crypto ban. Unlike China (ranked 20th in crypto adoption), which allows some underground activity, Iraq has virtually no legal crypto activity. Neighboring countries like the UAE have licensing frameworks, but Iraq chose strict prohibition.
Can I use cryptocurrency in Iraq without getting in trouble?
Technically, holding crypto privately isn't illegal, but using banks or payment services for crypto is banned. Enforcement is inconsistent, so some people trade informally. However, if authorities link your activity to money laundering, you could face legal consequences.
Comments
Jenna Em
October 22, 2025 AT 01:59 AMThe ban feels like a chain around every Iraqi's wallet.
Stephen Rees
October 25, 2025 AT 09:22 AMWhen a government tells its citizens what they may or may not own, it subtly reshapes the social contract, nudging people toward quiet acceptance of external authority instead of fostering genuine autonomy.
Katheline Coleman
October 28, 2025 AT 16:45 PMIt is noteworthy that the Central Bank of Iraq's stance aligns with a broader pattern of state intervention observed in economies experiencing heightened external pressures; such interventions often emerge under the pretext of safeguarding monetary stability, yet their ramifications extend beyond mere fiscal considerations. Historically, nations that have imposed absolute prohibitions on decentralized financial instruments have subsequently grappled with unintended consequences, including the proliferation of underground markets and the erosion of public trust in formal financial institutions. Moreover, the promulgation of circular No. 125/5/9 in November 2021 reflects an attempt to codify regulatory rigidity that, while ostensibly protecting consumers, simultaneously curtails innovation and limits the potential benefits of blockchain technology. From a macro‑economic perspective, limiting access to alternative stores of value can exacerbate capital flight, especially in environments where the national currency suffers persistent devaluation, as observed with the Iraqi dinar's 23% depreciation in 2021. In addition, the integration of the FATF's recommendations into domestic policy underscores a global consensus on anti‑money‑laundering measures; nevertheless, the blanket application of such standards without nuanced differentiation between illicit activities and legitimate usage may yield disproportionate enforcement outcomes. Cultural dimensions further complicate the narrative; the endorsement of the ban by religious authorities adds a moral veneer that resonates deeply within certain segments of the population, thereby reinforcing governmental edicts through doctrinal legitimacy. While the forthcoming Central Bank Digital Currency may present opportunities for enhanced transaction traceability and reduced cash‑handling costs, it also raises profound privacy concerns, particularly given Iraq's modest civil‑liberties score. Consequently, stakeholders must weigh the trade‑offs between financial oversight and individual freedoms, recognizing that excessive surveillance could engender resistance and foster illicit peer‑to‑peer networks. Comparative analysis with jurisdictions such as China reveals divergent enforcement philosophies: whereas China permits private holdings albeit under strict surveillance, Iraq's total prohibition eliminates even the possibility of regulated private ownership. This dichotomy highlights the spectrum of regulatory pathways available to sovereign states confronting the challenges posed by digital assets. Ultimately, the efficacy of Iraq's approach will hinge upon its capacity to balance macro‑economic stability, societal trust, and the evolving demands of a technologically adept populace, all while navigating the geopolitical implications of adopting a state‑controlled digital currency.
Amy Kember
November 1, 2025 AT 00:08 AMBank restrictions hurt but you can still trade on P2P platforms without the banks involved.
Evan Holmes
November 4, 2025 AT 07:31 AMAnother government overreach, typical.
Isabelle Filion
November 7, 2025 AT 14:54 PMOh, how original, a state‑run digital token-because private innovation never works.