The digital economy in Iran has grown very quickly in the last decade, where many companies depend on internet-enabled platforms for sales, payments processing, customer interaction, and logistics purposes. Such dependence has resulted in increased vulnerability of Iran’s economy to any internet shutdowns. In this letter, we analyze the largely ignored economic implications of state-mandated internet disruptions and demonstrate that the implications go far beyond the period of disruption. Internet shutdowns not only prevent commercial activity from taking place but also block payments processing, customer and supplier communication, and general business continuation in fields of social commerce, e-commerce, fintech, freelance work, and digital marketing. There is evidence that such disruptions cause long recovery periods, permanent loss of clients, decreased investment in the region, decline in consumer trust, and outflow of experienced professionals to other markets. Collectively, the result of internet shutdowns is a gradual erosion of innovation, entrepreneurship, and sustainability of digital ecosystem in Iran.