Iraq is one of only ten countries worldwide where using Bitcoin or any cryptocurrency is completely illegal. As of 2026, the Central Bank of Iraq has kept this ban in place for nearly a decade. You might wonder why a country would take such a strict stance. The answer lies in a mix of financial risks, religious concerns, and government control over money.
The Iraq cryptocurrency ban began in 2017
When the Central Bank of Iraq first banned cryptocurrency in 2017, it was one of the earliest moves in the Middle East. This wasn’t a random decision. The bank cited serious risks like money laundering, fraud, and market volatility. At the time, Iraq was already struggling with a fragile economy. Deposits made up just 8.8% of the total money supply, and the government faced monthly budget shortfalls of 18-20 trillion dinars. The ban aimed to stop digital assets from worsening these problems.
Legal Framework: No Room for Crypto
The ban got teeth in 2021 with CBI Circular No. (125/5/9). This document made it clear: cryptocurrencies have no legal status in Iraq. They can’t be used as payment, and banks must refuse any crypto-related transactions. The rules cover everything-banks, payment processors, and even e-wallet providers. In 2022, the bank doubled down, aligning with the Financial Action Task Force (FATF) guidelines to fight money laundering. This meant stricter checks on transactions and zero tolerance for crypto use in financial systems.
Enforcement Challenges: Banned but Still Used
Despite the strict rules, people in Iraq still trade crypto informally. You won’t find Bitcoin ATMs or regulated exchanges, but underground networks thrive. Farmers in Basra sell crops for Bitcoin. Baghdad traders use Telegram groups to swap Ethereum for cash. The problem? The bank only targets institutions, not individuals. So while banks get fined for crypto dealings, regular users operate in a gray zone. They could face charges under Anti-Money Laundering laws, but there’s no specific law against owning crypto. This creates confusion and inconsistent enforcement.
| Aspect | Iraq | China | UAE |
|---|---|---|---|
| Legal Status | Not legal tender; complete ban | Not legal tender; trading permitted but restricted | Regulated exchanges allowed |
| Financial Institutions | Prohibited from all crypto transactions | Banks cannot handle crypto | Licensed institutions can operate |
| Individual Use | De facto banned; enforcement unclear | Allowed but risky | Legal via licensed platforms |
| CBDC Status | Research phase (announced March 2025) | Digital Yuan live since 2020 | No CBDC announced |
State-Controlled Digital Currency Plans
While banning private crypto, Iraq is pushing its own digital currency. In March 2025, Mazhar Mohammed Saleh, the prime minister’s financial advisor, announced the Central Bank Digital Currency (CBDC) project. The goal? Replace paper money gradually. Officials say it will cut printing costs, reduce cash leakage, and help track money flows. But critics warn this could mean total government surveillance. Every transaction would be recorded, making it harder to hide purchases or payments-something already sensitive in Iraq, where criticizing the government can lead to arrest or torture.
Religious and Cultural Influence
The Kurdistan Regional Government (KRG) added religious weight to the ban. In 2018, its Supreme Fatwa Authority ruled against OneCoin, a cryptocurrency later exposed as a massive fraud scheme. This religious stance reinforced the government’s position. In Iraq, religious rulings carry serious weight. So even if someone wanted to ignore financial risks, they’d face social pressure too.
Why the Iraqi Dinar Matters
The 2021 devaluation of the Iraqi dinar from 1,182 to 1,450 per dollar shows why the government fears crypto. When the dinar dropped, food prices surged, sparking public anger. The Central Bank sees crypto as another threat to currency stability. If people started using Bitcoin for daily transactions, it could drain demand for the dinar. That’s why the bank insists on a state-controlled digital currency-it keeps money under government control while modernizing payments.
Expert Warnings: Surveillance Risks
Human rights groups are alarmed. The Human Rights Foundation rates Iraq as an "Electoral Autocracy" with low scores for civil liberties. Legal analysts warn the CBDC could turn Iraq into a surveillance state. With all transactions visible to authorities, citizens might lose financial privacy. Given Iraq’s history of cracking down on online dissent-like arresting social media critics-this isn’t a small concern. As one legal expert put it: "A balanced approach is needed. Right now, Iraq has neither clear rules for crypto nor safeguards against abuse."
Is cryptocurrency completely illegal in Iraq?
Yes. The Central Bank of Iraq’s 2021 and 2022 directives explicitly ban all cryptocurrency transactions. Banks and payment providers face fines for handling crypto, and while individuals aren’t jailed for owning it, they risk charges under anti-money laundering laws. No legal pathways exist for crypto use in Iraq.
Why does Iraq ban crypto but develop a CBDC?
The Central Bank wants control. Private cryptocurrencies threaten its authority over money supply and financial oversight. A state-controlled digital currency lets it modernize payments while monitoring every transaction. Officials claim this will cut costs and fight fraud, but critics see it as a tool for surveillance.
Can I get in trouble for using Bitcoin in Iraq?
You won’t be arrested just for owning Bitcoin, but using it for payments could trigger anti-money laundering investigations. Since Iraq’s banking system is tightly controlled, any crypto-related activity might be flagged. Most people trade informally through peer-to-peer deals, but this carries hidden risks.
How does Iraq’s crypto ban compare to other countries?
Iraq is among the strictest. While China allows some crypto trading (but bans banks), and the UAE has regulated exchanges, Iraq has no legal space for digital assets. Only ten countries worldwide have total bans like Iraq’s. This makes it an outlier even in the Middle East, where most neighbors have more flexible rules.
When will Iraq’s CBDC launch?
The Central Bank is still in research phase as of 2026. Officials say they’re testing technical infrastructure, but no launch date exists. Given Iraq’s economic challenges and limited tech capacity, implementation could take years. Even then, the CBDC will likely be used only for government payments initially, not everyday transactions.
1 Responses
Crypto ban is about control, not safety. Period.