A Senate subcommittee report says Tether’s USDT has become the main payment rail for Iran’s shadow banking system, with 84% of wallets sanctioned for links to Iran and its proxies transacting almost exclusively in the stablecoin. The report, released Monday by the minority staff of the Senate Permanent Subcommittee on Investigations under Senator Richard Blumenthal, also accuses Tether of freezing sanctioned wallets too slowly, and in some cases not at all.
What the numbers show
The subcommittee analyzed 846 cryptocurrency wallets that were sanctioned, targeted for seizure, or otherwise tied to Iran, Hamas, Hezbollah and the Houthis. Of those, 84% transacted exclusively or nearly exclusively in USDT. Bitcoin came a distant second.
The split varies by list. Among 757 wallets implicated in Iranian terrorism financing and flagged by Israel’s National Bureau for Counter Terror Financing, 87% moved mostly in USDT. Among 101 wallets designated by the US Treasury’s OFAC, 57% did. The report says most wallets labeled mixed also handled mostly Tether, making USDT the dominant asset in designated crypto activity by volume of funds laundered.
| Wallet set | Wallets analyzed | Share mostly USDT |
|---|---|---|
| All sanctioned Iran-linked wallets | 846 | 84% |
| Israel NBCTF seizure targets | 757 | 87% |
| OFAC designations | 101 | 57% |
Slow freezes, missed windows
The core accusation is not that Iranians use USDT. It is that Tether, which can blacklist any address, has been slow to do so when governments flag addresses tied to terrorism financing.
The report cites the June 2023 designation of 39 wallets tied to Hezbollah money launderer Tawfiq Muhammad Sa’id Al-Law. Tether froze five at the time and waited until March 2024 to blacklist the other 34. In the interim, more than $34.6 million in USDT moved out of those wallets, through exchanges including Binance, Paribu and BTCTurk, according to the subcommittee’s forensic review.
The report also says Tether did not freeze any wallets designated by the NBCTF from 2021 to May 2023, despite orders naming addresses controlled by Hamas. It notes the company became more responsive after the October 7, 2023 attacks, but describes its compliance since as uneven. One example stands out: in December 2025, Babak Zanjani, described as Iran’s most notorious money launderer, posted a Central Bank of Iran wallet address on X. Tether has still not blacklisted it, the report says.
“Tether has yet to blacklist that and similarly attributed addresses,” the report states, describing the company’s approach to blacklisting as “unhurried” in light of Iran’s reliance on the token.
The sanctions evasion machinery
The report walks through how the money moves. In September 2025, OFAC designated two Iranian nationals, Alireza Derakhshan and Arash Estaki Alivand, for running front companies that facilitated Iranian oil sales and military procurement. Blockchain analysis found the pair received $603 million in USDT over four years, operating nearly exclusively in Tether. Funds entered through offshore exchanges such as Bybit, OKX, Gate, Kyrrex and Binance, or through large transfers from unattributed wallets that the report links to hawala networks and cash desks.
USDT is also the vehicle Iran uses to prop up its collapsing currency, the report says, including through the Central Bank of Iran. That matters because Iran’s banks are cut off from the international system, leaving dollar-pegged tokens as the practical substitute for dollar clearing.
Politics and the Lutnick question
Blumenthal’s release frames the report in political terms. Tether’s ownership has deep connections to the Trump administration, and Commerce Secretary Howard Lutnick’s former firm Cantor Fitzgerald holds a stake and custody relationship with the issuer. The senator asks in the report whether Tether has received “lax enforcement and lenient oversight” from federal authorities since President Trump returned to office.
Alongside the report, Blumenthal sent a letter to Attorney General Todd Blanche requesting records on whether the Justice Department has narrowed, paused or closed its investigation into Tether. Prosecutors in the Southern District of New York opened a probe into the company in October 2024 over potential banking and sanctions violations. Treasury was reportedly weighing sanctions designations against Tether around the same time. Blumenthal asks whether either track has moved since January 2024, and asks DOJ to review the report and investigate Tether’s anti-money laundering and sanctions compliance.
What Tether says and what happens next
Tether did not immediately respond to a request for comment on the report’s findings. The company has historically argued that it freezes sanctioned addresses when it receives credible attribution, that USDT is the most widely used dollar instrument in economies cut off from banking, and that freezing broad swaths of addresses in developing markets would do more harm than good. It has also pointed to its cooperation with law enforcement, including the freezing of hundreds of millions of dollars in stolen funds this year.
The practical risk for the market is enforcement, not the report itself. A congressional minority report carries no legal force. But if the Justice Department acts on the referral, or if Treasury revisits designation, the most liquid token in crypto, with a circulation near $180 billion, would face a stress test no issuer has faced. Traders will watch whether the DOJ responds to the letter and whether any new freezing action shows up on Tether’s blacklist, which is public on Tron and Ethereum.