A Senate subcommittee report found that 84% of 846 sanctioned Iran-linked wallets transacted exclusively or nearly exclusively in Tether's USDT stablecoin between June 2021 and August 2026. The report, "Tethered to Terrorism: Crypto & Iran's Shadow Banking Network," was released by Sen. Richard Blumenthal, D-Conn., and carries no Republican signature. It calls its own findings preliminary and does not publish the underlying addresses, so outside parties cannot reproduce the results.
The report highlights a June 2023 episode in which Israel's counter-terror financing bureau flagged 39 cryptocurrency addresses tied to a Hezbollah money launderer. Tether froze five. The other 34 kept moving money for nine more months, with more than $34.6 million flowing through before the company shut them down. Tether said it froze roughly $550 million in Iran-linked assets in 2026 alone, including more than $344 million in April and more than $130 million in July. CEO Paolo Ardoino said Tether can act when credible information is provided by law enforcement.
The compliance burden could extend to banks. Tether's domestic token, USAT, comes from Anchorage Digital Bank, N.A., a nationally chartered bank. A freeze rule taking effect in January will require that a company cannot offer a digital asset from a foreign issuer unless that issuer can and will obey lawful orders to freeze it. Tether is based in El Salvador. The Treasury secretary may also declare an issuer noncompliant and bar American platforms from trading its token.
Blumenthal has asked the Treasury Department and the Justice Department to investigate Tether's sanctions and anti-money-laundering compliance. Neither department has confirmed an inquiry. The report faults Tether for reactive freezing, while Columbia Business School's Omid Malekan said arguments for bank-grade screening must grapple with the reality that such screening often fails to stop exact illicit flows. Tether did not immediately respond to a request for comment on the subcommittee's findings.