Senate report: Tether's USDT at the center of Iran's shadow banking

A report led by Senate Democrats and published on Sept. 28 says Tether's USDT stablecoin has become a "significant financial lifeline" for Iran and a tool for funding proxy organizations, including Hezbollah.

The 28-page investigation was led by Senator Richard Blumenthal of Connecticut, the top Democrat on the Senate Permanent Subcommittee on Investigations. Investigators examined 846 crypto wallets that Israel and the United States sanctioned over ties to Iran.

What the wallet analysis shows

The report found that 84% of the 846 wallets transacted in USDT, including transfers that helped the Iranian government move money across its borders and support its currency under U.S. sanctions, partly through the Central Bank of Iran. Among 757 wallets tied to Iranian terrorism financing, 87% used USDT as their main token. The report also says two sanctioned Iranian oil smugglers moved more than $603 million through the token between 2021 and 2025.

USDT runs on several public blockchains, including Tron and Ethereum, and each transfer leaves a public record that investigators can trace between wallets, exchanges and other services. The report says Tether did not freeze some wallets tied to Iranian entities or terrorist organizations, even though public information provided enough warning in several cases before authorities issued sanctions or seizure notices.

The figures cover a selected group of wallets and do not prove that every transfer financed terrorism.

Tether's response

Tether, the issuer of the world's largest dollar-backed stablecoin, disputes the report's framing. The company said it is committed to cooperating with the U.S. government and that it supported the freezing of nearly $550 million in Iran-linked USDT in 2026. "Tether has consistently demonstrated that USD₮ is not a haven for sanctioned actors, terrorist organizations or criminal networks," CEO Paolo Ardoino said. According to him, public blockchains give authorities visibility into how funds move, but Tether cannot reverse every transfer.

Calls for an investigation

Blumenthal said the report "exposes how Tether and its flagship token have become central to Iran's shadow banking system," and called on the Treasury and Justice Departments to investigate the company. He sent letters to Attorney General Todd Blanche and Treasury Secretary Scott Bessent asking them to examine possible sanctions and banking-law violations.

The report also asks whether federal agencies have given Tether lenient treatment in enforcing anti-money-laundering rules. It does not establish that any official directed the company's compliance decisions. Treasury has tightened sanctions on Iran since the start of the U.S. military campaign this year, and in August launched Operation Economic Outcast, which includes a focus on crypto transactions. The report itself imposes no penalties on Tether.