Crypto Overview in Iraq

Regulatory data is for informational purposes only and may not reflect the most current legal developments. Always consult qualified professionals before making decisions.

The Republic of Iraq maintains one of the most restrictive cryptocurrency regimes in the Middle East and North Africa. The Central Bank of Iraq (CBI / Al-Bank al-Markazi al-Iraqi) has prohibited all supervised institutions from dealing in virtual assets since 2017, formalised that position through Circular No. 125/5/9 in 2021, and reinforce it through both federal and Kurdistan Regional Government enforcement actions. Iraq’s regulatory direction is toward tighter financial surveillance and a state-controlled digital dinar, not toward any market opening for private virtual assets.

Legal Classification and Regulatory Framework

Cryptocurrency Status

Cryptocurrencies are not recognised as legal tender in Iraq, and crypto-denominated contracts are not enforceable. The CBI issued a formal prohibition in 2017 and formalised it through Circular No. 125/5/9 dated 22 November 2021, which prohibits supervised financial institutions, including banks, non-bank financial intermediaries, and electronic payment service providers, from engaging in virtual asset transactions. The circular also prohibits the use of payment cards and e-wallets for crypto. A directive of 26 March 2022 aligned the stance with FATF Recommendations on virtual asset risks, and in December 2024 the CBI publicly restated that it issues no licences to any cryptocurrency trading firm.

Iraq has no lex specialis statute criminalising cryptocurrency for individuals. The CBI instead invokes Article 36 of AML and CTF Law No. 39 of 2015 to penalise virtual-asset-related activity within the formal financial system, classifying such dealings as predicate offences for money laundering or terrorist financing. Peer-to-peer activity by individuals operates in a legal grey zone, informally tolerated but wholly unprotected and subject to enforcement at any time.

Tax Treatment

The General Commission for Taxes has not issued any crypto-specific guidance. Because virtual assets are not recognised as either property or currency under Iraqi law, no formal tax handling exists for them. In their absence, general rules apply: progressive personal income tax up to 15%, corporate income tax of 15% (35% for oil and gas), and capital gains taxed as ordinary income. Iraq does not have a general VAT. The prohibition environment makes tax planning for crypto holdings largely academic for onshore actors.

Regulatory Oversight

The Central Bank of Iraq is the primary authority on virtual assets, issuing binding circulars to all supervised institutions. The Office of Combating Money Laundering and Terrorism Financing (commonly referred to as the Iraqi Money Laundering Reporting Office), established within the CBI with financial and administrative independence under AML Law No. 39 of 2015, functions as the country’s financial intelligence unit. It receives and analyses suspicious transaction reports, transmits intelligence to the Public Prosecution, and liaises with international bodies including the Egmont Group. The Iraqi Securities Commission has not published a crypto-specific framework. In the Kurdistan Region, federal enforcement is supplemented by the KRG Ministry of Interior and the Erbil General Security Directorate, which in April 2025 announced a full ban on crypto and forex transactions in the region.

Business Environment

Banking Relationships

Iraqi banks operate under intense US-aligned scrutiny following a New York Federal Reserve compliance overhaul that took effect in early 2023. The CBI subsequently banned at least 14 Iraqi banks from its USD auction in July 2023 at the US Treasury’s request, with further bans and a Section 311 primary-money-laundering-concern designation against Al-Huda Bank issued in 2024, alongside OFAC designations targeting individuals and entities accused of channelling US dollars to Iran-linked actors. In this environment, licensed Iraqi banks are highly risk-averse and treat any indication of crypto exposure as grounds for de-risking. Correspondent banking relationships with international institutions already under pressure from Iran-sanctions exposure further shrink the practical options for any business seeking to operate at the intersection of digital assets and the Iraqi banking system.

Innovation Support

Innovation policy is concentrated on a state-led digitalisation programme. From 1 January 2024, all domestic commercial transactions are required to be settled in Iraqi dinars through electronic payment channels, a measure aimed at reducing US dollar circulation and expanding financial inclusion. The Electronic Payment Services Regulation No. 2 of 2024, issued 29 April 2024, replaced a decade-old e-payment law and introduced modern licensing requirements for traditional payment service providers, including a minimum paid-up capital of 10 billion IQD and a three-year feasibility study requirement. Critically, this regulation addresses conventional PSPs, not virtual asset service providers. The CBI has also published guidelines (March 2024) for the licensing of digital banks, which require a minimum capital of 100 billion IQD for foreign participants and limit foreign shareholding to 49%. No regulatory sandbox or formal fintech pathway for crypto businesses has been established.

The CBI Governor confirmed on 26 February 2025 that the bank is developing a central bank digital currency (the digital dinar). The project remains in the research and infrastructure phase as of mid-2026; no launch date has been set. Goals cited include reduced cash dependency, AML/CFT visibility, and cross-border payment capability. Financial inclusion has grown from approximately 20% to 40% over two years, with over 10 million pre-paid cards in circulation.

Crypto License in Iraq

Iraq has no virtual asset service provider licensing framework. There is no registration pathway, no authorisation category, and no regulatory safe harbour for cryptocurrency exchanges, custodians, brokers, or token issuers operating onshore. The CBI’s position, restated publicly as recently as December 2024, is that it does not issue licences of any kind to cryptocurrency-related businesses.

Current Status

The prohibition has teeth in practice. Kurdcoin, which operated as the first and only domestic cryptocurrency brokerage since 2017 and was the sole licensed-adjacent entity in the market, suspended all buy and sell activity on 13 November 2023 in compliance with the federal ban. The April 2025 Erbil ban and the KRG interior ministry committee formed in mid-2025 to enforce the closure of crypto and forex companies, following a reported $15 million investor fraud in Duhok province, further signal that enforcement is intensifying rather than relaxing at both the federal and regional level. The 2023 crackdown on mining resulted in over 5,000 rigs confiscated across Iraq.

Why No Framework

The CBI’s objections to a VASP licensing framework are structural. Iraq’s financial system is under sustained US and international pressure to contain dollar outflows and AML deficiencies. The MENAFATF Mutual Evaluation Report published in 2024 (on-site August 2023, updated December 2025) found significant effectiveness deficiencies across most of the 11 immediate outcomes, with only a small number rated “Substantially Effective” and none at the top “Highly Effective” tier in indexed summaries. Iraq is not on the FATF grey list, having exited in June 2018 and not been re-added as of the February 2026 plenary, but the low effectiveness scores mean regulators face pressure to demonstrate enforcement rigour rather than liberalise. The CBI’s preferred direction is a state-controlled digital currency under its own oversight, leaving no space for a private-sector licensing regime. Kurdish religious rulings classifying speculative crypto trading as impermissible provide additional institutional support for the ban in the Kurdistan Region.

What Operators Should Know

There is no route to legal authorisation at the federal or regional level as of mid-2026. Using Iraqi bank accounts, payment cards, or e-wallets in connection with crypto activities exposes the institution to enforcement under Article 36 of AML Law No. 39 of 2015. Informal P2P activity and offshore platform access by Iraqi residents exist in practice but carry risk of prosecution, asset confiscation, and the absence of any consumer recourse. Foreign operators targeting Iraqi users through offshore platforms face regulatory risk if they establish any local presence or financial relationship with Iraqi supervised institutions. The trajectory across 2024 to 2026 is one of accelerating enforcement: additional bank bans, the KRG committee formation, and the December 2024 CBI restatement all point in the same direction. Monitoring cbi.iq and aml.iq for changes to Circular No. 125/5/9 is the only reliable signal of a policy shift.

Market Characteristics

Adoption Patterns

Retail crypto activity exists primarily through informal peer-to-peer markets and offshore platforms, driven by demand for cross-border value transfer and dollar exposure in an environment of strict foreign exchange controls. Stablecoin demand is strong given the dollar tightening that intensified after 2023, and authorities have cited cases in which digital payment cards and informal arbitrage networks were used to convert Iraqi dinars into US dollars abroad. Reliable on-chain adoption data for Iraq is scarce, but informal usage is broadly acknowledged by regulators. The collapse of Kurdcoin’s regulated channel in November 2023 pushed remaining domestic demand into unregulated P2P and offshore arrangements. Fraud exposure is high: a $15 million investor fraud case was reported in Duhok in 2025, and thousands of Iraqis have been identified as victims of crypto scams operating in the regulatory vacuum.

Industry Focus

No domestic crypto industry exists in any regulated or semi-tolerated form. There are no licensed exchanges, custodians, or token issuers operating onshore as of mid-2026. Kurdcoin’s suspension in November 2023 effectively eliminated the only structured domestic brokerage. Mining activity persists informally despite the 2023 confiscation campaign. The broader technology and fintech ecosystem is focused on conventional e-payment infrastructure under the 2024 regulatory updates, with the CBI actively encouraging banks to modernise toward digital platforms rather than engaging with decentralised assets.

Regulatory Evolution

Iraq is a MENAFATF member. The trajectory from 2023 through 2026 has been one of tightening surveillance. The digital-dinar CBDC project (announced February 2025), the IQD settlement mandate (January 2024), the Electronic Payment Services Regulation No. 2 of 2024, and the KRG enforcement escalations of 2025 all reinforce a model in which digital payments are permitted under full state control while private virtual assets remain prohibited. US dollar auction bans and the Section 311 designation against Iraqi banks in 2023 and 2024 add international compliance pressure that works against near-term crypto legalisation. Observers should monitor cbi.iq for circular updates and FATF follow-up progress from the 2024 MENAFATF MER as the earliest signals of change.