Cryptocurrency adoption, trade flows and economic performance: evidence from a computable general equilibrium model for Iran

Purpose This paper examines the impact of cryptocurrency expansion on the Iranian economy, focusing on its role in mitigating high external transaction costs and facilitating international trade. Design/methodology/approach A computable general equilibrium (CGE) model, calibrated with Iran's latest social accounting matrix (SAM), is employed to simulate the macroeconomic and sectoral effects of cryptocurrency adoption. The model incorporates cryptocurrency expansion as a transaction cost reduction mechanism in international trade. Findings Cryptocurrency expansion increases GDP, total exports, imports and factor incomes while reducing the consumer price index. Sectorally, the crude oil and natural gas sector experiences the most significant value increase, whereas the construction sector faces the largest decline due to resource reallocation. Practical implications The findings suggest that policymakers can leverage cryptocurrencies to enhance trade efficiency and economic resilience, particularly in sectors with high export potential. Implementing regulatory frameworks for cryptocurrencies could facilitate their integration into formal financial systems, while bilateral or multilateral agreements within platforms like BRICS may help institutionalize crypto-based trade mechanisms. Originality/value This study provides the first empirical analysis of cryptocurrency impacts on Iran's economy using a CGE framework, highlighting its potential to enhance trade efficiency within regional agreements like BRICS. The integration of cryptocurrency-driven transaction cost reduction (TCR) into a formal economic model offers a novel approach for assessing digital currencies in emerging economies.