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

• DATE: 3 12 25
• BY: Stellan Marwick

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 banned from touching any form of digital currency. If you’re in Iraq and you’re using Bitcoin, Ethereum, or any other crypto, you’re doing it outside the law. And yet, people still do.

How the Ban Works

The ban didn’t happen overnight. It started in 2017, when the Central Bank of Iraq first flagged cryptocurrencies as risky. But the real teeth came in 2021 with Circular No. (125/5/9). This document made it crystal clear: no bank, no financial institution, no payment company can handle crypto transactions. Not even as an intermediary. Not even for exchange. Not even for holding.

It didn’t stop there. In March 2022, the bank doubled down with a new directive tied to the Financial Action Task Force (FATF) guidelines. That meant institutions had to overhaul their internal controls. They had to check customers more carefully. They had to report anything suspicious. And they had to make sure no one used credit cards or digital wallets to buy crypto. The goal? To cut off all legal pathways to digital assets.

The result? Iraq is one of only ten countries globally with a complete ban. Not a gray zone. Not a licensing system. Not a slow rollout. Just a hard stop.

Why the Ban? The Official Story

The Central Bank of Iraq says the reasons are clear: money laundering, terrorism financing, and consumer protection. They point to scams like OneCoin, a fake cryptocurrency that defrauded millions worldwide. In 2018, the Supreme Fatwa Authority in Kurdistan even issued a religious ruling against OneCoin, calling it haram. That added cultural weight to the ban-making it not just a financial rule, but a moral one too.

There’s also the issue of economic instability. Iraq’s currency, the dinar, lost value in 2020 when the government devalued it from 1,182 to 1,450 per U.S. dollar. Prices jumped. People lost trust in the system. The Central Bank of Iraq believes crypto could make this worse. If people start using Bitcoin to save money or pay bills, it could drain demand for the dinar. And with the government already struggling to cover its monthly budget-between 18 and 20 trillion dinars-it can’t afford another shock.

The Hidden Reality: Crypto Still Moves

Here’s the contradiction: despite the ban, crypto doesn’t disappear. It just goes underground.

In cities like Baghdad, Basra, and Erbil, peer-to-peer crypto trading thrives. People use WhatsApp, Telegram, and cash meetups to trade Bitcoin for Iraqi dinars. There are no official exchanges. No KYC checks. No bank records. Just trust, cash, and risk.

The government 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 flagged under anti-money laundering laws. That’s the gray area: you’re not breaking a crypto law-you’re breaking a finance law. And enforcement? Patchy at best. The Central Bank of Iraq has no real tools to track private transactions. No blockchain surveillance. No crypto monitoring software. So while the rules are strict, the reality is messy.

The CBDC: Iraq’s Alternative

While banning private crypto, the Central Bank of Iraq is quietly building its own digital currency. In March 2025, financial advisor Mazhar Mohammed Saleh confirmed the bank is in the research phase for a Central Bank Digital Currency (CBDC).

This isn’t Bitcoin. It’s not decentralized. It’s not anonymous. It’s a digital version of the Iraqi dinar-controlled entirely by the government. The goals? Reduce printing costs, cut cash leakage, track spending, and fight money laundering. Sounds reasonable, right?

But here’s the catch: a CBDC gives the government total visibility into every transaction. Every purchase. Every transfer. Every payment. And in a country where criticizing the government online can lead to arrest, detention, or salary cuts, that’s terrifying.

Human rights groups warn this CBDC could become a surveillance tool. Imagine: the state knows exactly when you bought bread, paid rent, or sent money to family. No privacy. No anonymity. No escape. That’s the trade-off Iraq is making: control over freedom.

How This Compares to the Rest of the World

Most countries don’t ban crypto-they regulate it. The U.S. taxes it. The EU licenses exchanges. Even China, which cracked down hard, still allows blockchain tech and has its own digital yuan.

Iraq is different. It doesn’t want to manage crypto. It wants to erase it. And replace it with something it fully controls.

That’s why Iraq ranks near the bottom in global crypto adoption indexes. Unlike Nigeria or Vietnam, where crypto is used to bypass inflation or send remittances, Iraq’s population is cut off from the global digital economy. No DeFi. No NFTs. No crypto savings. Just cash and fear.

Who’s Affected the Most?

It’s not the banks. They follow the rules. It’s the people.

Young Iraqis who want to earn online-freelancers, content creators, game developers-are locked out of global payment platforms like PayPal or Stripe. Many turn to crypto to get paid. Now, they can’t. They’re stuck with slow, expensive bank transfers or risky cash deals.

Small businesses that rely on cross-border trade face the same problem. Importers can’t pay suppliers overseas without crypto. Exporters can’t get paid quickly. The ban hurts the economy more than it helps.

And then there’s the diaspora. Millions of Iraqis abroad send money home. Most use traditional remittance services that charge 10% or more. Crypto could slash that to under 2%. But it’s illegal. So families pay more to stay connected.

What’s Next?

The Central Bank of Iraq isn’t backing down. The CBDC is moving forward. The ban stays. There’s no sign of legislation to legalize crypto. No public debate. No parliamentary vote. Just top-down control.

Legal experts say this creates a dangerous vacuum. Without clear laws, people don’t know what’s allowed. Banks are scared to innovate. Investors stay away. The economy stays stuck.

Some analysts argue Iraq needs a balanced approach: allow regulated crypto use while cracking down on fraud. But that’s not the path they’ve chosen.

For now, if you’re in Iraq and you want crypto, you’re on your own. No banks. No apps. No safety nets. Just risk, trust, and a quiet hope that the rules won’t catch up to you.

The future of money in Iraq isn’t decentralized. It’s centralized. And it’s being built right now-behind closed doors, with no public input.