A report from Democratic staff on the U.S. Senate Permanent Subcommittee on Investigations has identified Tether’s USDT stablecoin as the dominant cryptocurrency used by wallets linked to Iran and its regional proxies. Senator Richard Blumenthal said the findings showed that USDT had become a “superhighway” for sanctions evasion, money laundering and the financing of hostile activities.
The report examined blockchain activity involving 846 cryptocurrency wallets that had been sanctioned or targeted for seizure by the U.S. Treasury’s Office of Foreign Assets Control (OFAC) or Israel’s National Bureau for Counter Terror Financing. The wallets were linked to Iran or groups and networks associated with it. According to Decrypt, the analysis covered transactions between June 2021 and August 2026.
The headline finding was that 84% of the wallets used Tether’s USDT either exclusively or almost exclusively. The proportion was higher among the wallets designated by the Israeli agency: 87% of 757 wallets transacted predominantly in USDT. Among the 101 wallets designated by OFAC, the corresponding figure was 57%.
Report points to $603 million in USDT transfers
The subcommittee’s report, titled “Tethered to Terrorism,” also focused on the scale of transactions tied to two Iranian oil smugglers. It said Alireza Derakhshan and Arash Estaki Alivand moved more than $603 million in USDT between 2021 and 2025.
The report said the network connected to those individuals reached Hizballah, the Houthis and Iranian financial institutions. It also said there was evidence that the same network was used to buy and sell drones and other military equipment.
Stablecoins are digital tokens designed to track the value of a conventional currency. USDT is intended to maintain a value close to one U.S. dollar and can be transferred on public blockchains. That combination can make it useful for legitimate payments, but the report argues that it was also widely used by Iran-linked wallets to move funds across borders and between entities subject to sanctions.
The committee said Tether did not comprehensively and consistently freeze wallets designated by counter-terrorism agencies before 2024. In one case cited in the report, $34.6 million continued moving through sanctioned wallets after their designation.
The report also contrasted Tether’s description of its compliance with U.S. sanctions as “voluntary” and based on OFAC “guidelines” with the mandatory compliance obligations imposed on banks. It said Hamas had moved away from Bitcoin and a broader mix of tokens toward promoting USDT.
Blumenthal seeks investigations as Tether cites freezes
Blumenthal, the Democratic senator from Connecticut and ranking member of the subcommittee, has asked Treasury Secretary Scott Bessent and Attorney General Todd Blanche to investigate Tether’s anti-money-laundering and sanctions controls. He argued that the administration’s approach to overseeing cryptocurrency companies had weakened U.S. national security interests.
The senator also raised questions about Cantor Fitzgerald, which owns 5% of Tether and holds a large portion of its assets. The report noted that Cantor Fitzgerald was until recently run by Commerce Secretary Howard Lutnick and is now controlled by his children. It also cited Bloomberg reporting that Tether lent money to the children to purchase their father’s stake when he divested after being nominated.
The subcommittee wrote to Tether in June requesting information about the company’s handling of Iranian transactions. The report said Tether confirmed receiving the letter but had not responded by the time of publication.
Tether issued a statement on the same day the report was released, but did not directly address its findings. The company said it had worked with law-enforcement agencies to freeze approximately $550 million in 2026 across wallets that U.S. authorities linked to Iran’s central bank. That included more than $344 million in April and over $130 million in July.
Tether said the total value of USDT frozen in all cases exceeded $4.9 billion, following cooperation with more than 340 agencies in 67 countries. Chief Executive Paolo Ardoino said public blockchains give authorities visibility into fund movements that is not available with cash.
Regulatory backdrop and current market picture
The dispute comes as U.S. authorities have increased their focus on Iran’s use of digital assets. In May, the Financial Crimes Enforcement Network warned that Iran’s stablecoin activity included minting and moving large volumes between major stablecoin issuers. In August, the Treasury expanded its campaign by giving itself authority to sanction any foreign person operating in Iran’s digital-asset sector.
Moneyiar market data at 09:33-09:34 on October 1, 2026, showed USDT at $0.9995225582, down 0.01% over 24 hours and 0.03% over seven days. Ethereum was priced at $2,696.9104700599, up 0.02% in 24 hours and 2.16% over seven days. JUST stood at $0.133936035, with gains of 4.18% and 20.73% over those periods, while Ethena was $0.2617063821, up 0.33% over 24 hours and 30.64% over seven days.
