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. Unlike countries that regulate Bitcoin and Ethereum with licensing rules or tax frameworks, Iraq doesn’t just discourage crypto-it makes it illegal for any bank, payment processor, or financial institution to touch it. Even holding crypto isn’t explicitly criminalized for individuals, but using it can still land you in legal trouble under anti-money laundering laws. This isn’t just a policy-it’s a system built on fear, control, and deep economic insecurity.

How the Ban Works

The legal backbone of Iraq’s crypto ban is CBI Circular No. (125/5/9), issued in November 2021. It doesn’t just say "don’t trade crypto." It says: virtual assets have no legal status in Iraq. That means if someone sends you Bitcoin and then refuses to pay you back in dinars, you have zero legal recourse. The same goes for any contract, loan, or sale tied to crypto. The Central Bank of Iraq made it clear: only the Iraqi dinar counts as money.

This rule applies to everyone in the formal financial system. Banks can’t hold crypto wallets. Payment apps like PayPal or local e-wallets can’t process crypto transfers. Credit cards issued by Iraqi banks are blocked from buying Bitcoin on exchanges. Even foreign crypto platforms that try to serve Iraqi customers face pressure from the CBI to cut them off.

In March 2022, the bank doubled down with a directive tied to the Financial Action Task Force (FATF) guidelines. That meant banks had to overhaul their internal systems to detect any crypto-related activity-even indirect links-and report them. The goal wasn’t just to stop crime; it was to make compliance so expensive and risky that no institution would even try to work with crypto.

Why Iraq Banned Crypto

The official reasons sound familiar: money laundering, fraud, volatility. But the real story is deeper. Iraq’s economy has been in freefall for years. After the 2020 devaluation of the dinar-from 1,182 to 1,450 per U.S. dollar-prices for food and fuel jumped overnight. People lost trust in their own currency. Many turned to dollars, gold, and yes, crypto, as a way to protect their savings.

The Central Bank couldn’t control that. And when citizens start using alternative stores of value, it undermines the state’s ability to manage the economy. If people aren’t depositing money in banks, the government can’t print more dinars to fund its budget. Iraq’s monthly spending needs are between 18 and 20 trillion dinars, but deposits make up only 8.8% of the total money supply. That’s not a banking problem-it’s a collapse of public trust.

The ban isn’t about protecting consumers. It’s about maintaining control. Crypto lets people bypass the state’s financial system. And in a country where the government has a history of freezing salaries, cutting public services, and monitoring dissent, that’s unacceptable.

Religious Rulings Back the Ban

Iraq’s crypto ban isn’t just legal-it’s moral. In 2018, the Supreme Fatwa Authority of the Kurdistan Regional Government issued a religious ruling against OneCoin, a cryptocurrency later exposed as a massive fraud. The fatwa didn’t just condemn OneCoin-it painted all crypto as haram (forbidden) because it lacks intrinsic value and enables speculation. This wasn’t just a footnote. In a society where religious authority carries weight, this helped turn a financial policy into a cultural norm.

You won’t hear this in official press releases, but many Iraqis avoid crypto not because they fear the law, but because their imams told them it’s sinful. That’s a powerful tool for enforcement. No surveillance needed.

People Are Still Using Crypto-Quietly

Despite the ban, crypto isn’t gone. It’s underground.

Across Baghdad, Basra, and Erbil, peer-to-peer trades happen in cafes, through WhatsApp, and in cash exchanges. People buy Bitcoin from traders who meet them in person, pay in dinars, and hand over a private key on a USB drive. Some use VPNs to access foreign exchanges. Others buy USDT through informal networks tied to remittance services.

The CBI doesn’t arrest individuals for owning crypto. There’s no law that says, "Possession of Bitcoin is a crime." But if you’re caught trading large amounts, you could be accused of violating anti-money laundering rules. That’s a legal gray zone: not illegal to hold, but dangerous to use.

This gap between law and reality is intentional. The government wants to scare institutions into compliance, but it can’t stop every person with a smartphone. Enforcement is patchy. Police don’t have the tools. Courts don’t have the expertise. And most officials don’t even understand how crypto works.

The CBDC: The Government’s Answer

While banning private crypto, Iraq is racing to launch its own digital currency. In March 2025, Mazhar Mohammed Saleh, financial advisor to the Prime Minister, confirmed the Central Bank is actively developing a Central Bank Digital Currency (CBDC).

This isn’t Bitcoin. It’s the opposite. A CBDC gives the government total control. Every transaction is tracked. Every dollar spent can be monitored. The CBI says it wants to reduce cash printing, cut corruption, and improve financial inclusion. But critics see something darker.

Human rights groups warn that a state-controlled digital currency could become a tool of oppression. Imagine: your salary is paid in CBDC, but if you donate to a protest group, buy medicine from an unapproved pharmacy, or even post criticism online, your account could be frozen. Iraq already has a record of punishing dissent-arrests, salary cuts, torture. A CBDC makes that easier.

Unlike crypto, which is decentralized and anonymous, the CBDC will be centralized and traceable. It’s not innovation-it’s surveillance with a digital stamp.

What This Means for Iraq’s Future

Iraq’s crypto ban and CBDC plan reflect a deeper conflict: between financial freedom and state control. Other countries are trying to regulate crypto to harness its benefits. Iraq is trying to bury it and replace it with something even more controllable.

The result? A growing digital divide. The wealthy find ways to access crypto through offshore accounts and trusted intermediaries. The poor are stuck with a devalued dinar and a government-controlled digital currency that tracks their every purchase.

Legal experts, like those at Al Nesoor Law Firm, say Iraq needs balance. A total ban doesn’t stop crypto-it just pushes it into the shadows where it’s harder to regulate. And a CBDC without legal safeguards could erode civil liberties faster than any cryptocurrency ever could.

For now, the Central Bank of Iraq holds all the power. But as smartphones spread and internet access grows, more Iraqis will find ways to bypass it. The question isn’t whether crypto will survive in Iraq. It’s whether the government will realize that control isn’t the same as stability.

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