Iraq Crypto Policy Checker
Institutional Ban Status
All licensed financial institutions in Iraq are prohibited from engaging in any cryptocurrency-related activities.
ProhibitedIndividual User Status
Private individuals may hold crypto but cannot use it through Iraqi financial systems.
Gray AreaCBDC Development Progress
Iraq is developing a Central Bank Digital Currency (CBDC) called the 'Sovereign Digital Dinar'.
- Research phase initiated in 2025
- Goal: Digitize cash and improve financial tracking
- Controlled via permissioned blockchain
- Full state oversight of transactions
Key Regulatory Documents
| Document | Date | Description |
|---|---|---|
| CBI Circular No. (125/5/9) | Nov 22, 2021 | Bans all crypto activities for supervised entities |
| 2022 Directive | Mar 26, 2022 | Aligns with FATF AML/CTF recommendations |
Comparative Analysis
Iraq ranks among only ten countries globally with a complete crypto ban:
Compliance Checklist for Institutions
- Remove all crypto-related services from product catalogs
- Update AML/KYC programs to flag virtual asset transactions
- Conduct quarterly internal audits for crypto exposure
- Report suspected crypto activity to CBI’s Financial Crime Unit
Policy Summary
Current Status: Total prohibition on crypto for institutions; individuals in a legal gray area.
Future Outlook: CBDC development underway with full state control over transactions.
Recommendation: Businesses should avoid crypto involvement; individuals should use offshore exchanges to minimize risk.
When you hear Central Bank of Iraq (CBI) is the country’s monetary authority that issues dinars, regulates banks and sets financial policy, the first thing that comes to mind today is its hard‑line stance on digital assets. Since 2017 the CBI has declared a total Iraq cryptocurrency ban, barring every licensed financial institution from touching crypto and even restricting everyday payment cards from crypto‑related purchases. At the same time, Baghdad is quietly working on a state‑run Central Bank Digital Currency (CBDC) that could give the government the benefits of digital money while keeping full control.
Key Takeaways
- CBI Circular No. (125/5/9) (Nov2021) bans all crypto activities for banks, non‑bank financiers and payment providers.
- 2022 directive aligns Iraq’s rules with FATF AML/CTF recommendations, adding strict due‑diligence duties.
- Enforcement focuses on institutions; individual users operate in a legal gray‑area.
- Iraq’s approach is among only ten nations with a total crypto prohibition as of 2025.
- Parallel CBDC development aims to digitise cash while preserving state surveillance.
Legal Framework - How the Ban Was Built
The ban’s backbone is CBI Circular No. (125/5/9) issued on 22Nov2021, which explicitly forbids any supervised entity from dealing with virtual assets. The circular labels cryptocurrencies as non‑legal tender, meaning they cannot be used to settle debts or be exchanged for dinars under Iraqi law.
Just months later, on 26Mar2022, the CBI released a follow‑up directive that maps the ban onto the Financial Action Task Force global body that sets anti‑money‑laundering standards recommendations. This second document adds mandatory enhanced‑due‑diligence (EDD) procedures, internal policy reviews and a strict prohibition on using payment cards, e‑wallets or any electronic instrument for speculative crypto trading.
Together, these two instruments create a two‑layer shield: a blanket prohibition at the policy level and an operational compliance checklist for every licensed institution.
Institutional Prohibitions - What Banks and Payment Services Must Do
Any bank, non‑bank financial intermediary or electronic payment service provider in Iraq now faces a clear checklist:
- Remove all crypto‑related services from product catalogs.
- Update AML/KYC programs to flag any transaction that mentions virtual assets.
- Conduct quarterly internal audits to verify zero exposure to crypto wallets or exchanges.
- Report any suspected crypto activity to the CBI’s Financial Crime Unit.
Failing any of these steps can trigger sanctions, including fines, revocation of banking licences, or being placed on a regulatory watchlist. The compliance burden has been a major headache for Iraqi banks, many of which had already begun exploring limited crypto‑related services before the 2017 ban.
Impact on Individuals - The Enforcement Gap
While institutions are closely monitored, enforcement against private users remains spotty. The law does not criminalise the mere possession of crypto tokens, but using them can expose a person to AML‑related investigations if the activity is traced through a bank‑linked payment method. In practice, most users who trade on peer‑to‑peer (P2P) platforms or overseas exchanges stay under the radar, simply because the CBI lacks the technical infrastructure for extensive blockchain surveillance.
This creates a paradox: the official rule says “no crypto,” yet a thriving informal market persists, especially in urban centres like Baghdad and Erbil. The legal ambiguity can be summed up as “not illegal, but risky.”
Regional & Global Comparison - How Iraq Stands Out
To see why Iraq’s approach is noteworthy, compare it with neighbours and a few global benchmarks:
| Country | Legal Status of Crypto | Enforcement Focus | Notable Feature |
|---|---|---|---|
| Iraq | Complete prohibition | Institutions only; individuals in gray‑area | Parallel CBDC research |
| Iran | Ban on retail use, licensing for exchanges | Heavy penalties for unlicensed operators | State‑run digital rial pilot |
| United Arab Emirates | Regulated, licensing required | Both institutions and users monitored | Crypto‑friendly free zones |
| Saudi Arabia | Ban on payments, but crypto assets allowed for investment | Focus on AML compliance | Recent sandbox for fintech |
| United States | Legal but heavily regulated | Federal and state agencies enforce AML/KYC | Robust market, strong consumer protections |
Only about ten countries worldwide share Iraq’s outright ban, putting the nation in a tiny, restrictive club. By contrast, most economies have moved toward licensing regimes that let innovators experiment under supervision.
CBDC Development - The State‑Run Digital Alternative
In March2025, Mazhar Mohammed Saleh financial advisor to the Iraqi Prime Minister who announced the CBDC project revealed that the CBI is researching a sovereign digital dinar. The stated goals are:
- Cutting cash leakage and reducing printing costs.
- Improving real‑time tracking of money flows to fight money laundering.
- Boosting financial inclusion for the unbanked.
The CBDC model would sit on a permissioned blockchain controlled by the CBI, meaning every transaction is visible to the central authority. Critics argue this could turn the CBDC into a surveillance tool, especially given Iraq’s low scores on political rights and civil liberties reported by the Human Rights Foundation.
Economic Context - Why the Ban Matters
Iraq’s financial system is under severe liquidity stress. Deposits represent only about 8.8% of the total money supply, and the government needs roughly 18‑20trillion dinars each month to fund its budget. The 2020 dinar devaluation-from 1,182 to 1,450 dinars per US$,‑triggered inflation and public unrest.
In such an environment, the CBI argues that allowing private crypto could exacerbate capital flight and undermine the already fragile cash flow. The ban, therefore, is presented as a protective measure, even as the CBDC promises the “digital benefits” without the perceived risks of private tokens.
Legal & Human Rights Concerns
Human Rights Foundation’s CBDC Tracker rates Iraq low on financial freedom, warning that a state‑run digital currency could expand government surveillance. Legal analysts from Al Nesoor Law Firm a Baghdad‑based practice that published a detailed critique of the crypto ban argue that a balanced approach-encouraging fintech innovation while tightening AML safeguards-would align Iraq better with global standards.
Currently, the lack of a comprehensive parliamentary bill on digital assets leaves a legal vacuum: crypto is banned, yet not criminalised, and the CBDC is still in the research stage. This ambiguity can deter foreign investment and stifle home‑grown tech talent.
What Lies Ahead - Outlook & Recommendations
Given the CBI’s dual track of strict prohibition and CBDC development, the next few years will likely see:
- Continued enforcement of institutional bans, with possible fines for non‑compliance.
- Gradual rollout of a pilot CBDC in select districts, possibly linked to government subsidies.
- Increased pressure from international bodies (FATF, World Bank) to adopt a more nuanced regulatory framework that distinguishes between illicit and legitimate crypto use.
- Potential legislative effort to codify crypto rules, which could either tighten the ban further or introduce a licensing regime.
For businesses operating in Iraq, the safe play is to keep crypto entirely out of any product offering and to focus on compliance with the CBI’s EDD requirements. For citizens who still want access to digital assets, the realistic path is to use off‑shore exchanges and avoid any transaction that passes through an Iraqi‑registered bank or payment service.
From a policy perspective, a phased approach-lifting the blanket ban for vetted crypto‑service providers while maintaining robust AML controls-could preserve financial stability and still let Iraq benefit from the innovation that private digital assets bring.
Frequently Asked Questions
Is owning cryptocurrency illegal in Iraq?
The law does not criminalise private possession, but using crypto through any licensed Iraqi financial institution is prohibited and can expose you to AML investigations.
What does CBI Circular No. (125/5/9) actually forbid?
It bans all supervised entities-banks, non‑bank financial intermediaries, and electronic payment providers-from conducting any transaction that involves virtual assets or cryptocurrencies.
How does Iraq’s crypto policy compare to its neighbours?
Unlike the UAE or Saudi Arabia, which allow regulated crypto activity, Iraq imposes a total ban. Iran also bans retail use but offers licensed exchanges, putting Iraq among the most restrictive jurisdictions.
What is the status of Iraq’s CBDC project?
As of 2025 the CBDC is in the research phase. The government aims to launch a pilot that would digitise cash while keeping full oversight through a permissioned blockchain.
Can businesses use crypto for payments to foreign suppliers?
No. Any payment that routes through an Iraqi‑registered bank or payment service that involves crypto is a direct violation of the CBI circulars and can result in sanctions.
Eric Levesque
June 23, 2025 AT 07:53Iraq’s ban proves why we need strong national policies!
alex demaisip
June 23, 2025 AT 21:46The Central Bank of Iraq's recent policy articulation represents an intricate confluence of monetary sovereignty and regulatory prudence.
By invoking Circular No. (125/5/9), the CBI operationalizes a de jure prohibition that aligns with the Financial Action Task Force's AML/CFT directives.
This statutory instrument categorically excludes supervised entities from any exposure to virtual asset transactions, thereby mitigating systemic liquidity risk.
Concomitantly, the 2022 directive extends the regulatory perimeter to encompass enhanced due‑diligence obligations for peripheral financial intermediaries.
From a macro‑prudent perspective, the ban functions as a preemptive barrier against capital flight, which is salient given Iraq's precarious fiscal balances.
However, the legislative vagueness surrounding private individual holdings engenders a regulatory lacuna that may be exploited by illicit actors.
The juxtaposition of a total institutional prohibition with a nascent CBDM initiative underscores a paradoxical policy trajectory.
The sovereign digital dinar, envisaged as a permissioned blockchain construct, will centralize transactional data, facilitating real‑time oversight.
Such a design choice inevitably raises concerns pertaining to privacy, data sovereignty, and potential state‑level surveillance.
International comparative analyses elucidate that Iraq's approach diverges markedly from neighboring jurisdictions that have adopted licensing regimes.
Moreover, the exclusion of crypto from the legal tender definition precludes its utilization as a medium of exchange, thereby stifling financial innovation.
Stakeholder engagement, particularly from fintech entrepreneurs, appears limited, which may impede the development of ancillary services.
The regulatory architecture, while ostensibly robust, could benefit from calibrated risk‑based differentiation between retail and speculative usage.
Future legislative codification might consider a hybrid model that preserves AML integrity while unlocking transformative economic potential.
In sum, the CBI's dual strategy reflects a sophisticated yet contentious balancing act between control and modernization.
Elmer Detres
June 24, 2025 AT 11:39Navigating the tightrope between regulation and innovation is like walking a philosophical tightrope 🤔. Iraq's stance shows a deep fear of losing monetary control, yet the digital future is knocking at the door. The CBDC could bridge that gap if designed with user privacy in mind. Meanwhile, the grey‑area for individuals reminds us that human ingenuity finds ways around barriers. Keep your eyes on the horizon, and don’t let the fear of the unknown freeze progress. 🌟
Tony Young
June 25, 2025 AT 01:33The drama unfolding in Baghdad feels like a blockbuster where the hero is a digital dinar and the villain is fear 😱. CBI’s iron‑fist ban smacks down any hope of crypto‑powered freedom, but the plot twist is the looming CBDC. If the state can wield that tech wisely, it might rewrite the script for financial inclusion. Until then, the audience is left holding their breath. 😬
Fiona Padrutt
June 25, 2025 AT 12:39Exactly, we can't let foreign crypto hype destabilize our economy. The ban is a necessary shield for our sovereign dinar.
Briana Holtsnider
June 25, 2025 AT 20:59Your lofty terminology masks the reality that this policy is an overreach that stifles legitimate innovation.
Corrie Moxon
June 26, 2025 AT 05:19Well said! It's important to stay hopeful and keep learning about these changes.
Jeff Carson
June 26, 2025 AT 16:26Interesting read! I'm curious how the CBDC will interact with existing remittance channels, especially for diaspora families. 🤔 Any insights on the technical stack they're considering?
Anne Zaya
June 27, 2025 AT 00:46Looks like they're leaning towards a permissioned ledger, probably something like Hyperledger. Might make it easier for banks to adopt.
Emma Szabo
June 27, 2025 AT 11:53Wow, this policy is like a kaleidoscope of fear and ambition, painting Iraq's financial canvas with bold, contradictory strokes.
Fiona Lam
June 27, 2025 AT 20:13Mate, that's a proper over‑the‑top description, but honestly the ban feels like a blunt instrument. It’ll just push crypto underground.
OLAOLUWAPO SANDA
June 28, 2025 AT 07:19Why bother with all this crypto talk? Iraq should just focus on oil and leave digital fantasies to others.
Alex Yepes
June 28, 2025 AT 21:13The Central Bank of Iraq's regulatory edifice, as delineated in Circular No. (125/5/9) and the subsequent 2022 directive, constitutes a comprehensive prohibition framework predicated upon the preservation of monetary stability. By categorically disallowing licensed financial institutions from engaging in virtual asset transactions, the CBI seeks to mitigate systemic risk exposure. Moreover, the integration of FATF‑aligned anti‑money‑laundering standards further fortifies the policy's defensive posture. Nonetheless, the persisting ambiguity surrounding private individual holdings engenders a regulatory vacuum that may be exploited by illicit actors. Concurrently, the nascent sovereign digital dinar project embodies a strategic pivot towards digitization, albeit under stringent state oversight. This duality underscores a paradox wherein the state simultaneously eschews decentralized innovation while pursuing its own digital monetary instrument. Future policy trajectories may benefit from calibrated risk‑based differentiation to harmonize financial stability with technological progress.
Sumedha Nag
June 29, 2025 AT 05:33Sounds fancy, but in practice it'll just add more red tape and keep ordinary people out.
Holly Harrar
June 29, 2025 AT 13:53i think focusing only on oil won't help long term, diversifying with tech stuff could be good.