Central Bank of Iraq Crypto Restrictions: What You Need to Know in 2025

As of 2025, the Central Bank of Iraq enforces one of the strictest cryptocurrency bans in the world. It’s not just a warning - it’s a full legal prohibition. Banks, payment processors, and even e-wallet providers are barred from touching any digital asset. If you’re in Iraq and trying to buy Bitcoin, trade Ethereum, or use a crypto exchange, you’re operating in a legal gray zone - one that could land you under suspicion for money laundering, even if you’re not breaking any specific law.

How the Ban Works - And Who It Targets

The ban didn’t come out of nowhere. It started in 2017, but got teeth in November 2021 with CBI Circular No. (125/5/9). This document made it crystal clear: cryptocurrencies are not legal tender. They can’t be used to pay for goods, settle debts, or be exchanged for Iraqi dinars through any regulated financial channel. That means if you try to deposit Bitcoin into your bank account, the bank is legally required to refuse it - and report you.

The restrictions go even further. In March 2022, the Central Bank updated its rules to match international anti-money laundering standards from the Financial Action Task Force (FATF). Now, banks must monitor their customers for any signs of crypto-related activity. If someone uses a debit card to buy crypto on a foreign exchange, or transfers funds to a known crypto wallet, the bank has to flag it. Payment cards, mobile wallets, and online banking systems are all locked down.

This isn’t just about stopping banks. It’s about cutting off every possible bridge between Iraq’s formal economy and the crypto world. Even if you’re not a business, your personal transactions can get caught in the net.

Why Iraq Banned Crypto - And What They’re Replacing It With

The official reasons are familiar: money laundering, fraud, volatility, and consumer protection. But the real story is deeper. Iraq’s economy is fragile. In 2020, the government devalued the dinar from 1,182 to 1,450 per dollar overnight. Prices for food and fuel spiked. People lost savings. Trust in the banking system dropped to historic lows.

That’s when crypto started creeping in - not as a speculative asset, but as a lifeline. People turned to Bitcoin and USDT to protect their money from inflation and to send remittances without going through broken banking channels. The Central Bank saw this as a threat to its control over the currency.

So instead of adapting, it doubled down on control. And in March 2025, the government made its next move official: Iraq is developing its own Central Bank Digital Currency (CBDC). Financial advisor Mazhar Mohammed Saleh said the goal is to reduce cash printing, track spending, and stop money laundering. But experts warn this isn’t about freedom - it’s about surveillance.

Unlike Bitcoin, where transactions are pseudonymous, Iraq’s CBDC will be fully traceable. Every dollar spent, every transfer made, every purchase - recorded by the state. Given Iraq’s low civil liberties score (4.38/10), this raises serious concerns. If you criticize the government online, your salary could be docked. If you protest, you could be arrested. Now imagine the government can see every financial move you make - and block your transactions before you even spend.

What’s Different About Iraq’s Ban Compared to Other Countries

Most countries don’t ban crypto outright. China restricts exchanges but allows private ownership. The U.S. regulates it. The EU creates licensing systems. Even Saudi Arabia and the UAE are building crypto hubs.

Iraq is one of only ten countries in the world with a total ban. That puts it in the same league as Egypt, Algeria, and Nepal - not the U.S., China, or Germany. What makes Iraq unique is how comprehensive the ban is. It’s not just about institutions. It’s about people.

Other countries focus on stopping exchanges and mining. Iraq bans payment cards from being used for crypto purchases. It bans e-wallets from holding digital assets. It even pressures religious authorities to issue fatwas against crypto. The Supreme Fatwa Authority of the Kurdistan Region banned OneCoin in 2018 - a scam that turned out to be a pyramid scheme. But the fatwa didn’t just target fraud. It painted all crypto as religiously forbidden, adding moral weight to the legal ban.

This blend of financial, legal, and religious pressure makes Iraq’s approach unusually aggressive.

But People Are Still Using Crypto - Quietly

Here’s the irony: despite the ban, crypto is still circulating in Iraq. It’s not on exchanges. It’s not in banks. It’s in WhatsApp groups, peer-to-peer trades, and cash-for-Bitcoin meetups in Baghdad and Erbil.

People use cash to buy USDT from traders who hold it on their phones. They send it to family abroad. They use it to buy goods from Turkish or Iranian vendors who accept crypto. Enforcement against individuals is rare. There are no known cases of someone being jailed just for owning Bitcoin.

But that doesn’t mean it’s safe. If you’re flagged for suspicious transfers - say, you suddenly send 5 million dinars to a foreign wallet - the Anti-Money Laundering unit can investigate. You might be asked to prove your income. Your bank account could be frozen. Your phone could be seized.

The system is inconsistent. It’s not designed to catch every user. It’s designed to scare them away from using the formal system. And it’s working - for now.

The Legal Vacuum and the Risk It Creates

There’s no law in Iraq that says “owning cryptocurrency is illegal.” There’s no law that says “using crypto is a crime.” The ban applies only to financial institutions. That creates a dangerous gray zone.

You can’t legally buy crypto from a bank. But if you buy it from a stranger in a café? The law doesn’t say that’s a crime. Yet if you’re caught with crypto, you can still be accused of violating AML rules. That’s not legal clarity - it’s legal chaos.

Legal analysts from Al Nesoor Law Firm warn this vacuum makes Iraq more vulnerable to fraud, not less. Criminals don’t care about banking rules. They’ll use unregulated crypto trades to move stolen money. Meanwhile, ordinary people who just want to protect their savings are left with no safe options.

And the government isn’t helping. No parliament has passed a law on crypto. No court has ruled on its status. The Central Bank acts like a regulator, but it’s operating without legislative backing. That’s not regulation - it’s administrative overreach.

What’s Next for Iraq and Crypto?

The path forward is clear: Iraq is betting everything on its CBDC. The Central Bank is in the research phase, testing infrastructure, designing security protocols, and planning rollout. The goal is to replace paper money with a digital version controlled entirely by the state.

If successful, Iraq could become the first Arab country to launch a full CBDC. But the risks are high. Financial inclusion? Maybe - if you trust the government. Combatting corruption? Possibly - if the system isn’t manipulated. But surveillance? Absolutely guaranteed.

Human rights groups are sounding the alarm. A state-controlled digital currency in a country with weak rule of law and a history of punishing dissent could become a tool of oppression. Imagine being blocked from buying medicine because your transaction history shows you donated to a protest fund. Or having your pension payments frozen because you posted a critical comment online.

Meanwhile, the informal crypto economy keeps growing. People are learning to trade in the shadows. They’re using VPNs, encrypted apps, and cash-based networks to bypass the ban. The government can shut down exchanges. It can freeze bank accounts. But it can’t stop people from meeting in person, handing over cash, and sending digital money across borders.

The real question isn’t whether Iraq can ban crypto. It’s whether it can stop people from wanting it.

What This Means for You

If you’re in Iraq: avoid using regulated financial channels for crypto. Don’t link your bank account to any exchange. Don’t use your debit card to buy digital assets. The risks outweigh the rewards.

If you’re outside Iraq and sending money to someone there: don’t use crypto. Use traditional remittance services like Western Union or Wise. Even if your recipient wants crypto, the legal danger is too high.

If you’re a policymaker or investor: watch Iraq’s CBDC rollout closely. It’s a test case for how authoritarian regimes use digital currency to tighten control. What happens there could set a dangerous precedent for other countries struggling with inflation, instability, and public distrust.

The Central Bank of Iraq didn’t ban crypto because it’s dangerous. It banned it because it was uncontrollable. And now, it’s trying to replace it with something even more powerful - a currency the state can track, freeze, and monitor in real time.

The future of money in Iraq isn’t decentralized. It’s centralized. And that’s the real story behind the ban.