As of 2026, Iraq remains one of only ten countries in the world with a complete ban on cryptocurrency transactions. The Central Bank of Iraq (CBI) doesn’t just discourage crypto-it legally forbids banks, payment providers, and financial institutions from touching it. This isn’t a vague warning. It’s a hard rule, backed by official circulars, religious rulings, and a government that’s busy building its own digital currency instead.
How Iraq’s Crypto Ban Works
The ban started quietly in 2017, but it became official in November 2021 with CBI Circular No. (125/5/9). This document says one thing clearly: no bank, no e-wallet company, no payment processor in Iraq can handle Bitcoin, Ethereum, or any other cryptocurrency. Not as a payment method. Not as an investment. Not even as a way to send money abroad. It doesn’t stop there. In March 2022, the CBI updated its rules to match global anti-money laundering standards from the Financial Action Task Force (FATF). That meant banks had to overhaul their internal systems to screen for any crypto-related activity. They now have to report suspicious behavior, train staff, and keep detailed logs-all to prevent crypto from slipping into Iraq’s formal financial system. What’s more, the CBI made it clear: cryptocurrencies have no legal status in Iraq. They can’t be used to pay debts. They can’t be exchanged for dinars in court. If someone tries to sue over a crypto deal, the court won’t recognize it. That’s not just policy-it’s a legal dead end.Why Did Iraq Do This?
Iraq’s reasons aren’t just about crime. They’re tied to deep economic problems. The country’s banking system is weak. Only 8.8% of the money printed by the government is actually deposited in banks. The rest? It’s sitting in cash, hidden under mattresses, or flowing through informal markets. When Iraq devalued the dinar in 2021-from 1,182 to 1,450 per dollar-it sent inflation through the roof. Food prices jumped. People lost trust in the system. In that environment, the CBI saw cryptocurrency as a threat. If people started using Bitcoin to avoid the dinar, it could make the currency crisis worse. Plus, with weak oversight and corruption in parts of the government, regulators feared crypto could become a tool for smuggling, tax evasion, or even funding armed groups. There’s also a cultural layer. In 2018, the Supreme Fatwa Authority in Kurdistan banned OneCoin-a scam cryptocurrency-on religious grounds. That ruling wasn’t just about finance; it framed crypto as dishonest, risky, and against Islamic principles. For many Iraqis, that message carried weight.What About People Who Still Use Crypto?
Here’s the twist: the ban only applies to institutions. There’s no law that says, “You can’t own Bitcoin.” So, people still trade. They use peer-to-peer apps. They meet in person. They send crypto through foreign wallets and convert it to cash via underground exchanges. It’s not easy. It’s risky. But it’s happening. The CBI doesn’t go after individual users. No one’s been arrested for holding Bitcoin. But if you’re caught moving large sums through crypto, you could still be investigated under anti-money laundering laws. That’s the gray zone: you’re not breaking a crypto law, but you might be breaking a broader financial crime law. It’s like driving without a license-you won’t get pulled over every time, but if you cause an accident, you’re in trouble.
The CBDC: Iraq’s Digital Alternative
While banning crypto, Iraq is quietly building its own digital currency: a Central Bank Digital Currency (CBDC). In March 2025, Mazhar Mohammed Saleh, financial advisor to the Prime Minister, confirmed the CBI is in the research phase. Their goal? Replace paper money with a state-controlled digital version. Why? Because a CBDC gives the government total control:- It can track every transaction-where money goes, who gets it, and when.
- It can cut the cost of printing dinars-currently billions of dinars are spent each year just on paper and ink.
- It can stop cash leakage, where money disappears from the system before reaching banks.
- It can help fight corruption by making payments traceable.
How This Compares to Other Countries
Most countries don’t ban crypto-they regulate it. The U.S., EU, and even Saudi Arabia have rules for exchanges, taxes, and licenses. China bans crypto trading but allows its own digital yuan. Iraq? It’s one of the few that bans it entirely. Even in places with similar concerns-like Nigeria or Egypt-people still use crypto. In Iraq, the ban is tighter. You can’t use crypto cards. You can’t link your bank account to a wallet. You can’t even buy crypto through a local app. The system is designed to cut off access at the source. That’s why Iraq ranks near the bottom of global crypto adoption indexes. Chainalysis found almost no legitimate activity there in 2024. That’s not because people don’t want crypto-it’s because the system makes it nearly impossible to use legally.
What’s Next for Iraq?
The CBI isn’t backing down. The CBDC is moving forward. Research is underway. Testing could begin in 2026. If it launches, it will be one of the first in the Middle East. But the underground crypto market won’t vanish. It never does. People in Iraq still send remittances. They want cheaper international payments. They still distrust the banking system. As long as those needs exist, someone will find a way to bridge the gap. The real question isn’t whether crypto will survive in Iraq. It’s whether the government will realize that control isn’t the same as security. A ban doesn’t stop innovation-it just drives it underground, where it’s harder to monitor, harder to protect, and far more dangerous.Frequently Asked Questions
Is it illegal to own Bitcoin in Iraq?
No, there is no law that makes owning Bitcoin or any cryptocurrency illegal for individuals. However, using it through banks, payment apps, or exchanges is banned. If you trade crypto privately, you’re not breaking a crypto-specific law-but you could still face scrutiny under anti-money laundering rules if large sums are involved.
Can I use crypto to send money to family abroad?
Technically, yes-but not legally. Many Iraqis use crypto to send remittances because traditional services like Western Union are expensive and slow. But since banks can’t process crypto, you’d need to use peer-to-peer platforms, find a local seller, and convert it to cash. This carries risk: if you’re caught, authorities might treat it as an unlicensed money transfer, which can lead to fines or investigation.
Why doesn’t Iraq just regulate crypto instead of banning it?
The Central Bank of Iraq says it lacks the infrastructure and regulatory capacity to manage crypto safely. They fear unregulated platforms could be used for fraud, money laundering, or capital flight. Others argue this is an excuse. Countries like Nigeria and Kenya regulate crypto successfully despite weaker systems. Critics say Iraq’s ban is more about control than safety.
Will the CBDC replace cash completely?
Not anytime soon. The CBI says the CBDC will start as a supplement to cash, not a replacement. But over time, if the government pushes hard-offering incentives for digital payments and restricting cash use-it could phase out paper money. That’s already happened in Sweden and China. Iraq could follow suit, especially if public trust in the dinar continues to decline.
Can foreign crypto exchanges block Iraqi users?
Some do, but not all. Major platforms like Binance and Kraken don’t actively block Iraqi IP addresses. However, since Iraqi banks can’t process deposits from these sites, users must rely on peer-to-peer trades or third-party payment services-which increases risk. Some exchanges may eventually restrict access if pressured by international regulators or if Iraqi authorities crack down harder.
