Legal Crypto In Iraq

Overview of Cryptocurrency Legality and Regulation in Iraq

Legal and Regulatory Environment

Iraq Central Bank (CBI) have released the latest guidelines against the use of digital currency inside Iraq as per the latest issued press release dated 11th Feb 2018. Amid the deteriorating stability in the region, political pressure, laundering concerns and because it has no control over regulation, Iraqi currency traders were warned against using cryptocurrencies, and financial facilitators and individuals were also prohibited -effectively, the trade and investment of cryptocurrencies are forbidden for use in the formal financial sector in Iraq. Without specific cryptocurrency laws, a regulatory hole exists that individuals cannot shield themselves against, thus becoming potential targets for lawsuits. Relevant AML/CTF laws Some generally applicable AML/CTF measures, though largely indirectly relevant to cryptocurrency transactions, particularly regarding illicit finance, already exist pursuant to Iraq's Anti-Money Laundering Law No 39 of 2015. But these laws are not designed for digital assets, and compliance can be difficult. The C.B.I.’s reluctance is indicative of broader concerns surrounding cryptocurrencies, which function independently from the government and have the potential to undermine Iraq’s financial system.

Relevant Laws and Regulations

The following table summarizes the key laws and regulations impacting cryptocurrencies in Iraq, providing clarity on their scope and applicability:

Law/Regulation	Description	Applicability to Cryptocurrencies
CBI Directive (Feb 11, 2018)	Prohibits cryptocurrency transactions by financial institutions and traders.	Directly bans use, trading, and exchange of cryptocurrencies.
Anti-Money Laundering Law No. 39 of 2015	Establishes measures to prevent money laundering in financial transactions.	Indirectly applies to crypto if used in illicit finance.
Counter-Terrorism Financing Law	Regulates financing of terrorist activities through financial systems.	Indirectly applies to crypto in terrorism-related cases.
Banking Law No. 94 of 2004	Governs banking operations under CBI oversight.	No specific crypto provisions; enforces CBI’s ban.
Electronic Payment Systems Regulation (2014)	Regulates electronic transactions and payment systems.	Excludes cryptocurrencies from legal electronic payments.

The above-noted regulatory structure is indicative of Iraq's preference for financial control and stability, having the CBI exercise a heavy-handed control in order to mitigate the liabilities posed by unregulated digital currencies. The absence of any defined regulations highlights the difficulty of incorporating cryptocurrencies in the financial system of Iraq; especially when presented against the backdrop of Iraq’s economic and infrastructure conditions.

Exchange Methods

There are no officially approved exchanges for cryptocurrency in Iraq because the CBI does not allow such trade. Most trade takes place on informal channels like peer-to-peer (P2P) platforms including LocalBitcoins, where users exchange cryptocurrencies for Iraqi dinar or goods, frequently through cash or mobile payment methods like Zain Cash. International platforms such as Binance, Coinbase or Kraken could be reached through virtual private networks (VPNs), although this is said to be in breach of domestic law. There is also informal trading on social media groups on messaging platforms, such as Telegram and WhatsApp, mostly in urban areas. They are unregulated, open to fraud, and have serious legal implications.

Decentralized Finance (DeFi)

DeFi (Decentralized Finance) products do not fall under any specific regulation in Iraq, even though these platforms that offer financial services, such as lending, borrowing and trading from each other, without intermediates. CBI's ban on all cryptos (opinan) does seem to be including DeFi, making participation illegal or not supported. DeFi activities are stifled by low penetration of the internet, about 49% as of 2023 and low financial education. Users are exposed to fraud and scams, financial losses, and legal ramifications, without any curated data on the Iraqi DeFi ecosystem available.

Non-Fungible Tokens (NFTs)

This includes NFTs, which are one-off digital assets stored on blockchains, and would be caught in the CBI’s cryptocurrency ban, as transactions involving NFTs and similar are generally settled in cryptocurrencies such as Ethereum. There is no NFT-specific legislation and adoption is stymied by lack of finances, limited crypto market access and legal restrictions. There are probably NFT activities on international platforms, but it still bears all the legal risks of trading in cryptocurrency.

Useful Information

• Status: Cryptocurrencies are prohibited according to the CBI circular dated 11 February 2018.
• Monetary Authority: Central Bank of Iraq (CBI).
• Regulatory Requirement: None for cryptocurrency exchanges or services.
• Tax: There are no state specific tax laws for cryptocurrency in Oregon.
• Exchange methods: P2P platforms (LocalBitcoins etc,), international exchanges using VPN (illegal), social media groups, cash.
• DeFi Status: It’s not likely, no regulators, but slow adoption because of the infrastructure of limitations.
• NFT Status: Undetermined (crypto ban), no direct regulation; NFT activity is very low.

Conclusion

Regulatory Restrictions and Legal Ambiguity Define the Cryptocurrency Entrepreneurs Scene in Iraq. There’s the Central Bank of Iraq’s 2018 ban, and a general lack of cryptocurrency legislation, which effectively renders crypto, DeFi, and NFTs illegal for formal financial bodies. TII informal means of exchanging (P2P platforms or international exchanges through VPN) operate in a high risk legal twilight area. Thus the indirect influence caused by AML and CTF on cryptocurrency trading or investment also act as a threat, and as there are no clear directives and regulations, the users are at the crossroads of judicial and funding responsibilities. There is no such thing as legal play in the crypto space in the absence of a working regulatory structure, people must tread ever so softly to avoid getting hit by regulation, until the market is working reasonably well.