Bitcoin Emerges as a 'Safe Haven' in the Middle East Amid Iran Conflict, Says BPI Analysis

The Role of Bitcoin in Changing Conflicts

The Bitcoin Policy Institute (BPI), a U.S. think tank, pointed out that the ongoing conflict surrounding Iran has led to an increased presence of Bitcoin as a risk-averse asset in the Middle East and North Africa (MENA) region. In an analysis titled "Digital Asset Utilization in the Middle East Changing Due to Conflict," released on the 4th, BPI discusses the evolving role of cryptocurrencies in MENA.

Traditionally, when conflicts escalate, capital tends to flow out of the region. However, the current Iran conflict has shown a different trend. Instead of capital flowing out of the region, a certain percentage has shifted towards cryptocurrencies. BPI views this movement as indicative of Bitcoin's potential to function as a hedge in situations where economic and geopolitical risks are heightened.

In the early stages of the Israel-Iran conflict in June 2025, the cryptocurrency market exhibited a typical "risk-off" reaction, experiencing sell-offs similar to traditional assets.

According to BPI, following Israel's attacks on Iran, the global cryptocurrency market's market capitalization decreased by approximately 3.7% within hours, shrinking to around $3.26 trillion. Bitcoin also fell by about 2.3%, dropping to around $105,200, while Ethereum experienced a more significant adjustment of about 7.5%.

However, as the conflict prolonged, market movements began to change. Investors shifted their funds from high-risk altcoins to Bitcoin, with BTC dominance rising to 64.8%, the highest in about a month. Subsequently, despite ongoing geopolitical tensions, Bitcoin stabilized around $104,000 to $106,000.

BPI believes this movement highlights two aspects of the cryptocurrency market. One is that the cryptocurrency market did not cease trading 24/7, even during conflicts. Investors were able to respond immediately to changes in geopolitical situations, unlike traditional financial markets that close during certain hours.

The other aspect is that as investors became increasingly aware of risks such as rising oil prices due to instability around the Strait of Hormuz, inflation, and prolonged monetary tightening, Bitcoin began to be favored as a "safe asset," according to BPI.

Despite being close to Iran and affected by the attacks, the cryptocurrency ecosystem in the Gulf Cooperation Council (GCC) countries continued to operate without significant disruption.

In the United Arab Emirates (UAE), exchanges and blockchain companies maintained their operations through cloud-based infrastructure. Steven Coltman from 21shares praised the fact that cryptocurrency exchanges operated as usual even while the stock market was closed, viewing it as a sign of market maturity.

Polarization of Cryptocurrency Use in MENA

On the other hand, this conflict has also highlighted the polarization of cryptocurrency usage within the MENA region.

Countries facing currency depreciation, such as Egypt, Turkey, Lebanon, and Iran, have seen Bitcoin and USD-pegged stablecoins gain attention as means to maintain individual purchasing power. According to BPI, in Egypt, the volume of peer-to-peer Bitcoin transactions surged by over 300% following the currency devaluation.

In contrast, Gulf countries like the UAE, Bahrain, and Saudi Arabia are advancing efforts to incorporate cryptocurrencies as a pillar of their economic diversification strategies.

The UAE and Bahrain have established comprehensive regulatory frameworks for cryptocurrencies, with Dubai's Virtual Assets Regulatory Authority (VARA) revising rules regarding tokenization and cryptocurrency-related activities. Bahrain has also introduced regulations targeting the issuance and provision of stablecoins, strengthening the foundation of the cryptocurrency market.

Within MENA, while some countries utilize cryptocurrencies as a means to protect assets from currency depreciation and financial instability, Gulf countries position them as infrastructure to support new financial industries, reflecting contrasting purposes.

Saudi Arabia Leading Growth

In terms of transaction volume, Turkey is the largest market in MENA, reaching approximately $200 billion annually. However, in terms of growth rate and regulatory development, the Gulf region is gaining prominence. The UAE is set to process around $150 billion in cryptocurrency transactions by 2025, establishing itself as a major cryptocurrency hub.

Notably, Saudi Arabia has shown the strongest momentum, with the scale of cryptocurrency-related activities expanding by 154% year-on-year, according to BPI. With a population of 35 million, a smartphone penetration rate of about 97%, and over 60% of the population under 35, government investments in blockchain and fintech are supporting this growth.

Qatar has also recorded a 120% year-on-year growth, becoming the second fastest-growing cryptocurrency market in MENA. The improvement of regulatory environments and investments in digital financial infrastructure are behind this market expansion.

In light of these developments, BPI analyzes that the Gulf region is evolving from merely being a region that accepts cryptocurrencies to becoming one of the world's rapidly growing cryptocurrency ecosystems.

BPI assesses that the MENA cryptocurrency ecosystem has demonstrated high maturity and resilience amid the geopolitical risks surrounding the situation in Iran. It believes that even if new geopolitical shocks occur in the future, the cryptocurrency foundation in the region is likely to be further strengthened.