Digital transformation and the adoption of emerging technologies have created new opportunities to reshape the welfare functions of the state, shifting the emphasis from compensatory social protection toward preventive and empowerment-oriented approaches. Technologies such as big data, artificial intelligence, smart systems, and integrated information platforms can improve needs assessment, dynamic eligibility determination, social risk prediction, and targeted resource allocation, thereby enhancing citizens’ capabilities and agency. In Iran, however, the realization of technology-driven welfare transformation faces significant structural and institutional constraints. This study examines the following question: “What obstacles and challenges confront the transformation of the welfare functions of the Iranian state from traditional social protection toward smart citizen empowerment under the influence of emerging technologies?” It hypothesizes that, despite the transformative potential of these technologies, institutional and legal constraints, inadequate data and digital infrastructures, and limited policy flexibility make this transition gradual, complex, and costly. Using a descriptive-analytical approach, the study analyzes official laws, policy documents, and regulatory frameworks concerning social security, welfare, digital transformation, and data governance in Iran. The findings support the hypothesis and identify four interrelated barriers—institutional, legal, infrastructural, and policy-financial—that constrain the transformative use of technology in welfare governance. Under existing conditions, technological applications may also become oriented toward cost containment and administrative control rather than capability enhancement. The study concludes that technology is a necessary but insufficient condition for smart welfare transformation, which requires simultaneous reforms in data governance, legal frameworks, digital infrastructure, and welfare policymaking.