Democratic investigators in the US Senate place Tether's stablecoin USDT at the center of Iran's shadow banking system. Of 846 Iran-linked wallets examined, 84% transacted almost exclusively in USDT. Tether, however, points to nearly USD 550 million in frozen Iran-linked funds in 2026.
Tether issues USDT, a token pegged to the US dollar. It circulates as a means of payment and a store of value on blockchains such as TRON. As a centralized issuer, the company can block individual addresses and freeze the balances on them. In addition, USDT is the world's largest dollar-backed stablecoin.
The 28-page report comes from Democratic investigators on the Permanent Subcommittee on Investigations (PSI). The PSI is the standing investigative body of the US Senate. Its investigators work under Senator Richard Blumenthal, the panel's ranking Democrat. It is therefore a minority report, not a decision of the full subcommittee. The report came out on the same day as a Tether statement on its Iran freezes. At the same time, Blumenthal called for investigations in letters to Attorney General Todd Blanche and Treasury Secretary Scott Bessent. The allegations arrive during a phase of tighter US sanctions on Iran. In this phase, the Treasury is targeting digital assets as well.
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The report examines 846 Iran-linked wallets
The investigators analyzed blockchain transaction data from 846 crypto wallets. All of them are sanctioned or otherwise blocked in connection with Iran. On 84% of these addresses, payments ran exclusively or almost exclusively in USDT. Blumenthal concludes from this that Tether and its flagship token have become the center of Iran's shadow banking system. However, the figure only measures how common USDT is among addresses that are already sanctioned or blocked.
The investigators trace the preference for USDT to market structure. Iranian crypto exchanges use the token widely, and it offers more liquidity than alternative stablecoins. Circle's USDC, by contrast, appeared only to an extremely limited extent in the subcommittee's analysis. As a result, the finding centers on a single issuer that can technically block addresses.
According to the report, USDT serves the Iranian government as a significant financial lifeline. Tehran uses it to move money across borders and to prop up its own currency despite US sanctions. This includes transactions through the Central Bank of Iran. Furthermore, the report says the government funds proxy groups such as Hezbollah through the token. In Blumenthal's account, Iran also uses these funds to advance hostile drone and missile programs.
Blumenthal accuses Tether of failing to freeze wallets
The accusation goes beyond the numbers. It targets the issuer's conduct. Tether repeatedly failed to freeze wallets, the report states. Moreover, the report says the company did not act on wallets with strong indicators of illicit finance absent a sanctions or seizure notice. According to the report, this applied even where links to Iranian entities or terrorist organizations were publicly known. In his letters to Blanche and Bessent, Blumenthal therefore requests investigations into possible violations of sanctions and banking laws.
Personnel ties to the US government add political weight to the report. Before taking office, Commerce Secretary Howard Lutnick ran Cantor Fitzgerald, the report notes. Cantor acts as a custodian for Tether. His sons now lead the firm. The report also points to Bo Hines, now CEO of Tether U.S. He was formerly executive director of the White House Crypto Council. Consequently, Blumenthal asks whether this proximity earned Tether lenient anti-money laundering oversight.
Nevertheless, the paper remains a minority position. Its thrust aims at Tether's closeness to the Trump administration. In its statement, Tether did not directly address the charge of failing to freeze wallets. Instead, the company pointed to its own freezes this year.
Tether points to nearly USD 550 million in Iran freezes
In a statement, Tether puts the Iran-linked USDT freezes it supported in 2026 at nearly USD 550 million. The largest item came in April, with USD 344 million on two addresses. Tether coordinated this freeze with OFAC, the US sanctions authority, and with US law enforcement. OFAC later listed both addresses as identifiers of the Central Bank of Iran. In July, more than USD 130 million on four TRON wallets followed. Before that, the Treasury had expanded the central bank's designation by four addresses.
In total, Tether says it has frozen more than USD 4.9 billion worldwide. More than USD 2.4 billion of that is linked to US authorities. Beyond that, the issuer has supported more than 2,800 investigations, over 1,500 of them with US law enforcement. It works with more than 340 agencies in 67 countries. Israel's National Bureau for Counter Terror Financing has also sent tips. Acting on them, Tether has so far frozen more than USD 22 million across more than 640 addresses. In September 2025, the company froze around USD 1.5 million on 39 addresses. The Israeli agency attributed them to the Revolutionary Guard. That said, Tether is required to cooperate with the US government in any case.
"Tether has consistently demonstrated that USD₮ is not a haven for sanctioned actors, terrorist organizations or criminal networks." - Paolo Ardoino, CEO of Tether
Ardoino adds that public blockchains give authorities a visibility into money flows that cash lacks. Tether can thus act as soon as law enforcement provides credible information. The Senate report targets exactly this point. It criticizes a lack of response outside such official tips.
Two figures measuring different things
The Senate report and Tether's tally rest on different reference points. The report measures how widespread USDT is among wallets that were already sanctioned or blocked. Tether's total, on the other hand, covers funds the issuer froze in coordination with authorities or after their actions. So neither figure shows how much USDT flowed through these wallets before the freezes. Yet that figure would be decisive for assessing the allegation. Notably, both major Iran freezes of 2026 were directly tied to steps by OFAC and the Treasury.
Meanwhile, Washington is increasing pressure on Iran's crypto infrastructure. Since the start of the US military campaign against Iran this year, the Treasury has expanded its sanctions. In late August, it launched Operation Economic Outcast, which names digital assets, technology, gold, aviation and shipping as target sectors. Before that, OFAC had sanctioned Nobitex, the country's largest exchange, in June. According to the Treasury, the platform helped the central bank acquire stablecoins to support the rial. Shelbit and Aban Tether followed in August, and finally BitBank in September, which the Treasury links to Babak Zanjani. Thus the trading venues themselves are now in the authorities' sights as well.
The Senate report, however, expects issuers to respond to strong indicators even without an official order. Attorney General Blanche and Treasury Secretary Bessent now decide on the requested investigations.
