U.S. Senator Richard Blumenthal released a Senate report on September 28 alleging that Tether’s USDT stablecoin has become a “significant financial lifeline” for Iran’s shadow banking network, escalating Washington’s scrutiny of the world’s largest dollar-pegged token. The report from the Permanent Subcommittee on Investigations, which Blumenthal leads as ranking member, found that 84% of 846 crypto wallets sanctioned over ties to Iran and its regional proxies transacted “exclusively, or nearly exclusively” in USDT, and the senator said he is referring its findings to the Treasury and Justice Departments for investigation.
How the subcommittee built its case
Titled “Tethered to Terrorism,” the report analyzed wallets designated by the Treasury’s Office of Foreign Assets Control and Israel’s National Bureau for Counter Terror Financing between June 2021 and August 2026. Investigators concluded USDT is “a primary illicit international payment system for Iran,” letting the government move money across its borders and prop up the rial through the Central Bank of Iran. Two sanctioned oil smugglers, Alireza Derakhshan and Arash Estaki Alivand, moved more than $603 million in USDT over four years through a network connected to Hezbollah, the Houthis, and Iranian financial institutions, the report found.
Lax enforcement claims and a political edge
Blumenthal alleged Tether failed to freeze wallets designated by counter-terrorism agencies before 2024 and “continues to fail to proactively block clearly illicit wallets,” which he said encouraged groups such as Hamas to shift from Bitcoin to USDT. The subcommittee said $34.6 million kept moving through sanctioned wallets after designation and pointed to a May 2026 FinCEN alert that named stablecoins as “one leg of Iran’s shadow banking network.” Blumenthal also flagged Tether’s ties to the administration: Cantor Fitzgerald, once run by Commerce Secretary Howard Lutnick, owns 5% of Tether and holds a substantial share of its roughly $114.9 billion in reserves. “The Trump Administration’s glaring lack of oversight of cryptocurrency issuers has undermined our own national security interests,” Blumenthal said.
Tether pushes back
Tether rejected the characterization, noting it had helped freeze nearly $550 million in Iran-linked USDT this year and works with more than 340 law-enforcement agencies. “Tether has consistently demonstrated that USD₮ is not a haven for sanctioned actors, terrorist organizations or criminal networks,” CEO Paolo Ardoino said. The dispute lands as Treasury expands sanctions against Iranian crypto channels — and as the report concedes that Iran’s USDT use is part of a broader stablecoin problem regulators are still working to contain.
