Can Bitcoin assist during internet outages following Iran’s currency plummet of 95% in a single night?

Iran’s currency, the rial, has plummeted to approximately 1 million per US dollar, a milestone that highlights the rapid erosion of savings when confidence in currency diminishes.

The currency nearly halved in value throughout 2025, with official inflation hitting 42.5% in December. Recent demonstrations in Tehran’s Grand Bazaar were sparked by the steep decline of the rial and the instability that hinders merchants from pricing goods or planning purchases.

The government reacted with a nationwide communications blackout, prompting some Iranians to utilize Starlink to bypass the restrictions, despite the service being illegal and punishable in Iran.

Before the nearly complete collapse on January 9, the rial had dropped to around 42,000 per USD. It then surged to just below 1 million per USD and has stayed around that figure since. This represents an overnight loss of about 95% of its purchasing power.

However, due to the instability within the nation and the lack of functionality, the situation is even more dire, with quoted rates fluctuating between approximately 1 million and 1.5 million per USD.

Iran rial to dollar (Source: xe.com)

The crisis is not only economic and political but also infrastructural. When a government is able to cut off internet access to quell protests, the effectiveness of Bitcoin as a secure haven hinges not just on its design but also on whether individuals can access the network at all.

This dual challenge, consisting of currency devaluation and access denial, is what Bitcoin’s framework was intended to address, even though the situation in 2026 is messier than the original whitepaper envisioned.

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What Bitcoin was actually designed to achieve

The Bitcoin whitepaper, released in 2008, positions the system as “a purely peer-to-peer version of electronic cash,” allowing for online payments to be sent “directly from one party to another without the involvement of a financial institution.”

This technical design goal eliminated the necessity for a trusted third party to authenticate transactions, yet the decision to pursue it was politically motivated. The genesis block, mined in January 2009, contains a message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

The Times’ January 3, 2009 front page featured “Chancellor on brink of second bailout for banks,” the headline embedded in Bitcoin’s genesis block.

This reference pertains to the UK government preparing a second bailout for the banking sector during the financial crisis, and it is often interpreted as a commentary on monetary instability and the vulnerabilities of depending on institutions that socialize losses while privatizing profits.

Bitcoin was not created specifically for Iran, but it was designed for a world where trust in financial intermediaries can fail, and where individuals might need to transfer value without needing authorization from a bank, a government, or a payment processor.

The collapse of the rial makes this use case tangible.

What the rial collapse exposes

The weakness of the rial is indicative of structural dysfunction that renders daily economic life unfeasible. The primary concern for bazaar merchants is price volatility, not merely depreciation.

When currency fluctuates unpredictably, merchants cannot determine whether to purchase or sell inventory, and households cannot plan expenditures or save in local currency without witnessing their purchasing power diminish.

Sanctions and institutional capture exacerbate the dysfunction. Sanctions, combined with the economic dominance of the Revolutionary Guards, restrict the state’s ability to stabilize the economy, intensifying a legitimacy crisis.

The World Bank anticipates that Iran’s economy will contract in 2026 amidst high inflation and currency pressures, suggesting that the current crisis is more than just a temporary shock.

This breakdown creates a demand for alternatives such as US dollars, gold, stablecoins, and Bitcoin, but it also provokes governmental countermeasures. Iran’s Central Bank High Council has set limits of $5,000 on annual stablecoin purchases and $10,000 on holdings, clearly aiming to diminish digital dollarization and maintain the rial’s status as the sole legal tender.

The imposed caps demonstrate that when individuals attempt to escape monetary devaluation, governments perceive that escape as a threat and take action to seal the exits.

The Iranian rial declined from 892,000 per dollar in February 2025 to 1.5 million in January 2026, sharply accelerating following the December protests.

Bitcoin as a safeguard versus Bitcoin as a lifeline

The framing of “Bitcoin is a safe haven” merges two distinct assertions.

The first is Bitcoin as a hedge, a store of value that maintains purchasing power when fiat currencies deteriorate. The second is Bitcoin as a lifeline, a payment system that operates when banks and payment processors are unavailable or compromised.

Bitcoin as a hedge presents clear advantages: limited supply, self-custody, portability, and resistance to censorship at the protocol level.

However, it also has notable disadvantages.

Price volatility implies that Bitcoin can lose 20% or 30% of its value within weeks, making it an inadequate substitute for stable purchasing power in the short term (though still preferable to losing 95% in hours). On- and off-ramps are limited, particularly in regions with capital controls or stringent enforcement.

Governments can target exchanges, prohibit peer-to-peer trading, or impose harsh penalties for non-compliance.

Bitcoin as a lifeline represents a different scenario. Cross-border transactions without banks become feasible, and the network can theoretically operate with satellite or mesh connectivity when conventional internet access is disrupted.

However, if the government shuts down fiat on-ramps and off-ramps, usage shifts to over-the-counter markets where prices can diverge, liquidity decreases, and user safety becomes a significant concern.

Gold exhibits the largest 52-week drawdown at approximately 70%, whereas Bitcoin and the dollar index show moderate volatility compared to the stability of stablecoins.

Reuters reported that the use of Starlink during Iran’s blackout underscores this point: access to the network is as crucial as the design of the protocol.

In numerous high-inflation scenarios, stablecoins emerge as the primary substitute for the dollar because they are less volatile than Bitcoin and more user-friendly for everyday transactions. However, Iran has moved to limit stablecoin purchases and holdings precisely because they threaten the state’s monetary authority.

This regulatory response illustrates the conflict between what Bitcoin-style systems were designed to enable and what governments will allow when those systems challenge the currency monopoly.

Three potential scenarios for what follows

Iran’s path will evaluate whether censorship-resistant value transfer is effective in practice or is contained by state authority. Three scenarios encapsulate the spectrum of outcomes.

The crisis intensifies, and controls become stricter. Ongoing unrest, increased sanctions, more frequent blackouts, and tighter foreign exchange and crypto regulations characterize this path.

The rial rate declines further as confidence diminishes, and demand for crypto rises, but utilization shifts to become more over-the-counter and informal. Connectivity akin to Starlink becomes a financial factor.

Observe the frequency of blackouts, enforcement actions against exchanges, and new limitations on stablecoins or access to foreign exchange.

Repression stabilizes the streets but does not stabilize the currency. A crackdown on demonstrations fails to address structural inflation or institutional dysfunction.

The rial may temporarily stabilize at weak levels, but households will still seek any non-rial store of value due to a continued lack of trust in the currency. Keep an eye on inflation figures, import restrictions, and the disparity between official and parallel exchange rates.

A political reset or thaw in sanctions. A change in leadership, negotiated relief from sanctions, or normalization of trade restores access to foreign exchange and rebuilds some confidence in the currency.

The rial stabilizes or appreciates, and demand for crypto transitions from necessity to speculation as households regain access to formal banking systems. Monitor for indicators of sanctions, constraints on oil exports, and reopening of banking channels.

Scenario	Triggers	What happens to IRR	What happens to crypto usage	Biggest risk to civilians
Deepening crisis / controls tighten	Prolonged unrest; harsher sanctions; more frequent internet blackouts; tighter FX/crypto restrictions; aggressive enforcement	Parallel IRR weakens further; official/parallel gap widens; volatility stays high	Demand rises but shifts more OTC/informal; higher spreads/premiums; reliance on alternative connectivity grows	Access + safety: loss of connectivity/rails, higher legal exposure, scams/robbery risk in OTC markets
Repression / no macro fix	Crackdowns stabilize streets but inflation persists; continued sanctions pressure; tighter import/price controls	Temporary stabilization at weak levels, punctuated by spikes; purchasing power still erodes	More “store-of-value” behavior (USD/gold/stablecoins/BTC) but with constrained on/off-ramps; slower, cautious adoption	Slow grind: falling real wages/savings, shortages, selective enforcement that punishes ordinary users
Thaw / reset	Negotiated sanctions relief; trade normalization; leadership/policy shift; improved FX access and banking channels	IRR stabilizes or strengthens; volatility declines; parallel premium compresses	Usage shifts from necessity → speculation/portfolio; more activity on formal rails; OTC premiums fall	Whiplash + unequal access: abrupt rule changes, winners/losers from re-opening, potential backlash against recent “exit” strategies

What Bitcoin was designed to remedy, and what it cannot

Iran’s rial crisis is not an anomaly; it is part of a global trend where monetary instability prompts safe-haven behavior. Gold reached unprecedented levels amidst geopolitical and institutional uncertainty, while Bitcoin increased during uncertain times in 2025.

This convergence indicates that individuals gravitate towards similar assets during different crises, reinforcing the theory that the demand for censorship-resistant value transfer increases as trust in institutions declines. However, the dual-use reality complicates the narrative.

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When civilians use crypto defensively, states and sanctioned entities also experiment with crypto systems to bypass restrictions and transfer value outside conventional financial frameworks.

This dynamic explains why regulators remain vigilant even when humanitarian use cases are justifiable, as the same tools that assist individuals in evading currency controls can also enable regimes to bypass sanctions.

The rial’s collapse at 1 million per dollar serves as a reminder that money can cease to function, and not just theoretically, but in the practical sense that savings vanish, merchants struggle to price goods, and the government employs inflation and capital controls to maintain power at the expense of purchasing power.

Bitcoin’s framework was specifically designed for such a scenario: a system where value transfer does not require permission from a financial institution or government, and where the supply is fixed rather than subject to political whims.

However, the reality in 2026 is that governments are pushing back. Iran’s restrictions on stablecoins, internet blackouts, and enforcement actions illustrate that governments perceive alternative currencies as threats and strive to seal the exits when individuals attempt to escape monetary devaluation.

The critical question is not whether Bitcoin’s design is censorship-resistant—it is—but whether that resistance endures when governments can restrict internet access, target exchanges, criminalize usage, and impose harsh penalties for non-compliance.

The answer relies on the infrastructure. If individuals can access the network through alternative connections like VPNs or satellite internet, and if peer-to-peer markets can operate despite governmental opposition, then Bitcoin functions as intended.

If access routes are severed and enforcement renders usage perilous, the design of the protocol becomes irrelevant because people cannot connect to it.

This is the challenge presented by Iran’s crisis: whether the system designed to rectify flawed money can withstand the backlash from states that rely on monetary control to sustain their power.

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