Senate report links Tether's USDT to Iran's shadow banking network
A Democratic Senate investigation says Iran's financial networks rely heavily on Tether's USDT, while Tether says it has frozen $550 million in Iran-linked tokens over the past year.
Key points
- Sen. Richard Blumenthal released a 28-page report on Monday alleging Tether and USDT are central to Iran's shadow banking system.
- Investigators analysed blockchain data from 846 crypto wallets sanctioned or blocked over links to Iran.
- The report says 87% of 757 wallets tied to Iranian terrorism financing predominantly transacted in USDT.
- Blumenthal wrote to Attorney General Todd Blanche and Treasury Secretary Scott Bessent urging probes into possible sanctions and banking law violations.
- Tether said on Monday it had helped freeze $550 million in USDT linked to Iran over the past year.
A new Senate investigation says Tether's USDT stablecoin sits at the centre of Iran's shadow banking network and the financing of terrorist groups. The 28-page report, led by Senator Richard Blumenthal and released on Monday, was produced by Democratic investigators on the Senate Permanent Subcommittee on Investigations, according to The Block.
The panel's investigators analysed blockchain transaction data from 846 crypto wallets that had been sanctioned or otherwise blocked because of their association with Iran. They found that Iran's financial networks lean heavily on USDT, noting that 87% of 757 wallets implicated in Iranian terrorism financing had predominantly transacted in the stablecoin.
Investigators said Iran's preference for USDT is unsurprising. Iranian crypto exchanges use it widely, and Tether's token is more liquid than other alternatives. They also argued that Tether repeatedly failed to freeze and block wallets, saying that outside sanctions or seizure notices the company did not act on wallets showing strong signs of illicit finance, even when public information linked them to Iranian entities or terrorist organisations.
Senate report findings
Blumenthal said the report shows how Tether and its flagship token have become central to Iran's shadow banking system, allowing the Iranian government to fund regional proxies, commit human rights abuses and pursue hostile drone and missile programmes while defying US sanctions. He sent letters to Attorney General Todd Blanche and Treasury Secretary Scott Bessent urging them to investigate potential sanctions and banking law violations. The Wall Street Journal earlier reported news of the report.
The report also points to Tether's ties to the Trump administration. Commerce Secretary Howard Lutnick led Cantor Fitzgerald, which acts as a custodian for Tether, before joining the government, and his sons have since taken over leadership at the firm. Bo Hines, previously executive director of the White House Crypto Council, is now chief executive of Tether U.S.
Blumenthal said those connections raise national security concerns. He argued that Tether's deep links to the administration raise questions about whether federal authorities have given the company lax enforcement and lenient oversight of its anti-money laundering obligations.
Tether's political connections
Tether pushed back the same day. The company said it had helped freeze $550 million in USDT linked to Iran over the past year. Chief executive Paolo Ardoino said Tether has consistently shown that its token is not a haven for sanctioned actors, terrorist organisations or criminal networks, adding that public blockchains give authorities visibility into fund movements that cash does not, and that Tether can act when law enforcement provides credible information.