Senate Report Says Tether’s USDT Is Central to Iran’s Shadow Banking Network

Tether’s USDT linked to Iran’s shadow banking network as a U.S. Senate investigation examines 846 sanctioned wallets

A U.S. Senate report led by Senator Richard Blumenthal says Tether’s USDT has become a major financial tool within Iran’s shadow banking system, citing widespread use of the stablecoin among wallets sanctioned over ties to Iran.

The report, examined in an X post by Coin Bureau, analyzed 846 cryptocurrency wallets sanctioned or targeted for seizure over connections to Iran and related networks. Investigators found that 84% of those wallets transacted exclusively or almost exclusively in USDT.

Senate Report Raises Questions Over Tether’s Compliance

The findings come from an inquiry by Democratic investigators on the Senate Permanent Subcommittee on Investigations. The report says USDT was used in transactions intended to help move funds into and out of Iran and support the country’s currency despite U.S. sanctions, including through the Central Bank of Iran.

Blumenthal, the subcommittee’s ranking member, said the findings demonstrate that Tether and its dollar-pegged token have become central to Iran’s shadow banking network. He called on the U.S. Treasury Department and Department of Justice to investigate potential violations of sanctions and banking laws.

The report also criticized Tether over the timing of wallet freezes. Investigators said the company did not comprehensively and consistently freeze wallets designated by counterterrorism authorities before 2024 and accused it of continuing to fall short of proactively blocking wallets linked to illicit activity.

The Senate report further links the Iranian cryptocurrency network to the movement of funds associated with regional proxy organizations and the procurement and sale of drones and other military equipment. Those are allegations and findings contained in the Senate report, rather than independent determinations presented in the X post.

Tether Points to Nearly $550 Million in Freezes

Tether has disputed the characterization that USDT serves as a haven for sanctioned entities and emphasized its cooperation with U.S. and international authorities.

In a statement published on Sept. 28, Tether said actions involving USDT had resulted in approximately $550 million in assets being frozen during 2026 across wallets identified by U.S. authorities as connected to Iran’s Central Bank and Iranian sanctions networks.

Tether said more than $344 million in USDT was frozen across two addresses in April after information was provided by the U.S. Office of Foreign Assets Control and U.S. law enforcement. In July, more than $130 million in USDT across four wallets was frozen as U.S. authorities expanded sanctions involving additional addresses.

The company said it remains committed to fighting illicit finance and cooperating with law enforcement. Tether CEO Paolo Ardoino has also said the company has consistently demonstrated that USDT is not a safe haven for sanctioned actors, terrorist organizations or criminal networks.

Treasury and Justice Departments Face Calls for Review

Blumenthal has asked the Treasury and Justice departments to examine whether Tether violated sanctions or other U.S. laws. The Senate report therefore places the company’s handling of sanctioned wallets under renewed scrutiny as U.S. authorities continue examining cryptocurrency-linked financial activity involving Iran.

The immediate question is whether the agencies will open or expand formal investigations into Tether following the Senate report and its findings on the 846 wallets.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.