They’ll use the same techniques they are now: monitoring and blocking cash flows, getting partners not to use it, etc. This is the same way that drug dealers get caught even if they try using a variety of currencies, collectibles, real estate, etc. — at some point you need real currency to spend and the in/out-flows are monitored.

All a cryptocurrency adds is a public record making that task easier and the hokum used to sell it may make the NSA’s job easier if people believe it’s anonymous. Setting up a separate one also means there’s less benign traffic to hide behind.

Not all cryptocurrencies add public record. Examples: ZCash, Grin.

Via payment processors ... prevent people buying this currency / trading at exchanges that enable it?

Wouldn't people just mine the currency themselves and exchange it locally? As long as the currency's token is unique and scarce, people can use it to trade.

As long as the currency's token is unique and scarce and accepted as equivalent to cash by people that have goods to deliver. Many things are unique, scarce and entirely worthless.

If the purpose is to allow Iranians to circumvent restrictions on international trade, then you encounter the problem of not many people wanting to swap their goods or dollars for crypto-rial. (If the purpose is to allow people to make payments within the Iranian banking system in accordance with Iranian law, the crypto layer is redundant)

Ask what incentive those people have? That involves taking on personal risk in many countries, it’s highly visible to the authorities, and unless you’re surrounded by people who need to use it you have no benefit from the activity.

Between Iran coin and Dogecoin, I know which one people should mine themselves and exchange locally because it's unique and scarce and usable for trade!

Pretty simple, ban it from the banking system. Also, reach out to Europe and Canada to do the same.

China, Russia, Iran, and even Venezuela can play with cryptocurrencies, but when the money needs to go elsewhere, it has to be in a currency that people have faith in and is accepted everywhere.