Democratic staff on the Senate Permanent Subcommittee on Investigations analyzed 846 cryptocurrency wallets sanctioned over links to Iran and its regional proxies and concluded that 84% of them transacted exclusively, or nearly exclusively, in Tether’s USDT stablecoin, according to Decrypt.
The report, titled “Tethered to Terrorism,” was released this week by the subcommittee, where Senator Richard Blumenthal (D-CT) is ranking member. Blumenthal said on CNBC’s Squawk Box that USDT is not just a path but a superhighway for sanctions evasion, money laundering and trafficking, and that Treasury and Justice Department enforcement had been nonexistent. He has referred the findings to both departments.
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Key facts
- Of 846 sanctioned wallets studied, 84% transacted predominantly in USDT; the figure splits to 87% of the 757 wallets designated by Israel’s National Bureau for Counter Terror Financing and 57% of the 101 designated by Treasury’s Office of Foreign Assets Control.
- The review covers wallets designated between June 2021 and August 2026.
- Two sanctioned Iranian oil smugglers, Alireza Derakhshan and Arash Estaki Alivand, moved more than $603 million in USDT between 2021 and 2025 through a network reaching Hizballah, the Houthis and Iranian financial institutions.
- The report says $34.6 million continued to move through sanctioned wallets after their designation.
- Tether said it froze roughly $550 million across wallets U.S. authorities linked to Iran’s central bank during 2026, including more than $344 million in April and over $130 million in July.
Blockchainreporter reported that the subcommittee concluded USDT is a primary illicit international payment system for Iran, allowing the government to move money across its borders and prop up the rial through the Central Bank of Iran. The same report said the subcommittee found that Iran’s USDT use is part of a wider stablecoin problem that regulators are still working to contain.
Compliance disputes and political dimension
Before 2024, the report says, Tether did not comprehensively and consistently freeze wallets designated by counter-terrorism agencies, and it adds that Hamas shifted away from Bitcoin and a mix of tokens toward promoting USDT. Blockchainreporter reported the subcommittee’s claim that Tether continues to fail to proactively block clearly illicit wallets, language that goes further than Decrypt’s account. The subcommittee contrasts Tether’s description of its OFAC compliance as voluntary, following guidelines, with the obligations that apply to banks.
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Blumenthal also points to Cantor Fitzgerald, which owns 5% of Tether and holds a large share of its assets. The bank was run until recently by Commerce Secretary Howard Lutnick and is now controlled by his children; the report cites Bloomberg reporting from March that Tether lent the children money to buy out their father’s stake when he divested on nomination. Blockchainreporter adds that the firm holds a substantial share of Tether’s roughly $114.9 billion in reserves, a figure that does not appear in Decrypt’s account. Blumenthal said the administration’s oversight of crypto firms has undermined U.S. national security interests.
Tether published a statement the same day as the report, setting out its cooperation with law enforcement. Chief executive Paolo Ardoino said blockchains give authorities visibility into fund movements that cash does not. The company puts its all-time total frozen at more than $4.9 billion, working with over 340 agencies in 67 countries, and Ardoino said Tether has consistently demonstrated that USDT is not a haven for sanctioned actors, terrorist organizations or criminal networks, per Blockchainreporter. The statement did not mention the subcommittee or its findings.
The timing follows a May 2026 FinCEN alert describing Iran’s stablecoin use as one leg of a shadow banking network, including minting and moving between large volume stablecoin issuers, and an August Treasury move giving itself the power to sanction any foreign person operating in Iran’s digital asset sector.
Why it matters
The referral puts the compliance record of the largest dollar-pegged token in front of two agencies that can open investigations, which matters for exchanges, payment processors and any business that settles in USDT. For Tether, the dispute centers on whether voluntary adherence to OFAC guidelines is enough, an argument the subcommittee frames against bank-style obligations. Stablecoin oversight has already tightened through the FinCEN alert and Treasury’s expanded Iran authority, so the report lands in an enforcement environment that was hardening before it was published.
What to watch
The next concrete signals are responses from Treasury Secretary Scott Bessent and Attorney General Todd Blanche to Blumenthal’s request for an investigation, and whether Tether answers the subcommittee’s June request for information on its handling of Iranian transactions. The company confirmed receipt of that request but had not replied by publication.
This article reports on regulatory and enforcement claims, not investment advice. Markets in stablecoins and other crypto assets are volatile and uncertain, and nothing here should be read as a recommendation.
Sources: Decrypt, Blockchainreporter
