The value of the Iranian rial has plummeted to record lows, sparking protests and political turmoil across the country. Experts say the situation is unlikely to improve soon, as a clear path to the country’s economic recovery remains unclear.
Iran is facing an economic crisis that is causing a level of social unrest not seen in decades. In late 2025, the value of the Iranian rial plummeted, sparking widespread protests across the country and causing annual inflation to soar to more than 40%.
As of January 2026, the currency exchange rate hovered around 1.5 million rials per US dollar. This makes the rial virtually worthless on the world market, making it essentially impossible to buy goods from outside the country. As a result, the purchasing power of Iranians has been severely affected, with a large portion of the population unable to afford basic necessities such as food and healthcare.
This situation created large-scale instability within the country, which escalated to the point where the people called for the overthrow of the current government. More than 2,000 protesters have been killed, and the government continues to impose a large-scale internet blackout to quell the unrest.
Details of Iran’s economic collapse
The reasons behind Iran’s economic chaos and currency collapse are multilayered. Experts on the issue link it to decades of policy decisions, as well as a combination of both external and structural pressures.
Geopolitical tensions have been a major factor in Iran’s recent economic instability. The country has been incredibly isolated from the global economy for many years due to both international sanctions dating back to 1979 and sanctions imposed by the United States in particular. This makes it extremely difficult for the country to meaningfully participate in global markets, as the US dollar is the world’s reserve currency.
Iran has experienced sustained inflation rates of over 40% annually since 2018, according to a report by the International Institute for Sustainable Development. This inflation is primarily driven by fiscal control, with “persistent government deficits being financed by monetary expansion by the country’s central bank.” This cycle of inflation and currency depreciation has pushed millions of Iranians into poverty, with the World Bank estimating that up to 40% of the country lives below the poverty line.
According to The Independent, Iran has also suffered a major drought over the past five years, which has dramatically affected food production. A drought of this magnitude has had a negative impact on Iran, which is economically isolated because it has few trading partners outside of countries such as China and Russia. Yale University’s Environment 360 magazine reports that the country is now on the brink of “water bankruptcy” as “years of haphazard dam planning and overpumping” have destroyed vital groundwater reserves.
Iranians turn to stablecoins amid currency collapse
The collapse of the Iranian rial due to years of hyperinflation, currency depreciation, and international sanctions has wiped out household savings and severely impacted Iranians’ purchasing power. This has led many citizens to turn to stablecoins pegged to the US dollar as a way to store their leftover money.
Due to this increased usage of the stablecoin, the Iranian government imposed restrictions on transactions in September 2025 to avoid further flight from the rial. According to Iran International, the ruling limits annual purchases to $5,000 per person and limits total holdings to more than $10,000.
However, the Iranian government recently shut down the internet almost completely across the country, making it nearly impossible for its citizens to access their stablecoin holdings. US President Donald Trump has said he will consult with Elon Musk about using Starlink to restore Iran’s internet. Even if internet access via Starlink is partially restored, it could provide a critical lifeline for Iranians during this time of economic uncertainty.
