Why Iran May Choose Stablecoins Over Bitcoin to Collect Its Strait of Hormuz

Key Insights

• Chainalysis is making the case for why Iran will accept stablecoins if it implements the Strait of Hormuz toll.
• The country’s historical use of stablecoins and Bitcoin’s volatility are the core reasons.
• Iran’s charging ships to pass the Strait could have implications for international commerce.

Chainalysis has predicted that Iran may eventually adopt a stablecoin for tolls on ships passing through the Strait of Hormuz. In a recent blog post, the crypto investigative firm said this aligns with the country’s past reliance on stablecoins.

The report follows a recent news report indicating that Iran wants ships passing through the Strait to pay tolls in cryptocurrencies. While the Financial Times report specifically mentioned Bitcoin, earlier reports have also mentioned Yuan and stablecoins as possible options.

Iran More Likely to Go with Stablecoins Due to Stability

According to Chainalysis, its extensive analysis of the Iranian regime’s on-chain behavior suggests that it is more likely to go for a stablecoin. It noted that while Bitcoin is censorship-resistant, stablecoins are more preferable for large-scale implementation.

Iranian authorities have adopted cryptocurrency to bypass sanctions imposed by the US and other Western powers. However, they have mostly used US Dollar-pegged stablecoin due to its stability and ease of use.

It said:

“Historically, the regime has leveraged stablecoins because their backing by the U.S. dollar guarantees preservation of value and provides the liquidity necessary for use at scale.”

That adoption has increased significantly in the past few months, with the Iranian rial falling amid the war and economic crisis in the country.

Interestingly, the report noted that Bitcoin’s volatility makes it unlikely to serve as an instrument for high-volume, trade-oriented activities such as toll collection. While there are signs that Iran-affiliated groups are using Bitcoin, it is only cybercriminal groups that are doing so for ransomware extortions and similar activities.

Chainalysis Warns About Risk of Iran Charging Ships for Strait of Hormuz

Meanwhile, the report warned that allowing Iran to charge ships passing the strait could have serious implications. It was observed that it could establish a precedent for other sanctioned countries to start charging ships passing through critical maritime chokepoints.

They added that it could also allow Iran to generate sizable revenue from the strait. With 20% of global oil and LNG passing through Iran, the country could generate significant revenue, serving as a lifeline for the regime.

However, there is also the implication for ships that pay the toll. With Iran currently under sanctions, transacting with the country violates US law. This is a major compliance risk for shipping companies that could expose such companies to penalties.

It noted that companies seeking to transact with sanctioned entities must obtain approval from the US Treasury. Thus, those without such approvals are at risk and can be easily traced if they pay the toll, as it would be on the blockchain.

“Making cryptocurrency payments to an Iranian state-linked entity without such authorization would likely constitute a sanctions violation, exposing companies to the risk of enforcement actions, fines, and reputational damage.”

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