USDT Has Become a 'Significant Financial Lifeline' Within Iran's Shadow Banking Network, Senate Democrats' Report Finds
Key Takeaways
- •A Senate subcommittee report found that 84% of 846 sanctioned cryptocurrency wallets linked to Iran and its proxies transacted exclusively or almost exclusively in Tether's USDT.
- •Investigators said the network moved funds in and out of Iran, supported the Iranian rial, and facilitated transactions connected to military equipment and regional proxy organizations.
- •The report criticized Tether for failing to consistently freeze wallets identified by U.S. and Israeli counter-terrorism authorities before 2024.
- •Senator Richard Blumenthal referred the findings to the U.S. Treasury and Justice departments and called for investigations into Tether's sanctions and anti-money-laundering controls.
- •Despite Iranian-linked USDT activity falling from 72% of the wallets' crypto transactions in 2024 to 67% in 2025, USDT remained prevalent among recently sanctioned wallets, including those tied to Iran's central bank and alleged oil-sale networks.
Tether's USDT stablecoin has become a "significant financial lifeline" within Iran's shadow banking network, serving as a key payment mechanism in a cryptocurrency system used to move funds around international sanctions. The finding comes from a report released by Democrats on the U.S. Senate Permanent Subcommittee on Investigations.
The report analyzed blockchain activity involving 846 cryptocurrency wallets that had been sanctioned or targeted for seizure because of their links to Iran and Iranian proxies. Investigators found that 84% of those wallets had transacted exclusively, or almost exclusively, in USDT.
According to the investigators, the network has been used to move funds into and out of Iran, to support efforts to prop up the Iranian rial, and to facilitate transactions connected to military equipment and regional proxy organizations.
The report also criticized Tether, saying the company failed to consistently freeze wallets identified by U.S. and Israeli counter-terrorism authorities before 2024, and that it has continued to allow some illicit wallets to operate.
Senator Richard Blumenthal, the subcommittee's ranking Democrat, referred the findings to the U.S. Treasury and Justice departments and called for investigations into Tether's sanctions and anti-money-laundering controls.
The report acknowledged that Tether has since frozen some wallets associated with Iranian entities and that USDT activity linked to Iran has declined. Transactions in USDT across wallets attributed to Iran fell from 72% of their crypto activity in 2024 to 67% in 2025, according to data cited in the report.
Despite the decline, investigators said USDT remained prevalent among wallets sanctioned more recently, including wallets linked to Iran's central bank and networks alleged to have facilitated Iranian oil sales. That continued use is likely to keep attention on how stablecoin issuers identify and freeze sanctioned wallets, as well as on how U.S. authorities assess the effectiveness of those controls.
The findings put the use of dollar-backed stablecoins in sanctioned markets under renewed scrutiny, highlighting how cryptocurrency networks can provide access to dollar-denominated liquidity outside the traditional banking system.
