A group of U.S. Senate Democrats has accused Tether’s dollar-pegged stablecoin, USDT, of playing a significant role in Iran’s sanctions-evasion infrastructure. A new report from the Senate Homeland Security and Governmental Affairs Committee’s Permanent Subcommittee on Investigations argues that USDT has become a major financial channel within Iran’s cryptocurrency-based shadow banking network.
Published on September 28, the report alleges that Iran-linked entities have used cryptocurrency transactions to circumvent international sanctions and that Tether has repeatedly failed to block wallets associated with Iranian interests. The lawmakers claim that delays in freezing designated wallets, along with inconsistent responses to requests from authorities, have allowed potentially illicit transactions to continue.
The report also argues that insufficient enforcement before 2024 contributed to the misuse of stablecoins by sanctioned entities and militant organizations. According to the document, some groups shifted toward USDT after previously using Bitcoin and other cryptocurrencies. The report frames these developments as evidence of broader challenges in using digital assets to enforce financial restrictions.
Although the report does not provide a total for the amount of USDT allegedly transacted by the Iranian government, it estimates that the government conducted approximately $2 billion in transactions last year. The Wall Street Journal was the first outlet to report on the document.
Tether has disputed the implication that it is failing to cooperate with authorities. In a blog post published Monday, the company said it had supported the freezing of nearly $550 million in Iran-linked assets and cited several recent actions taken at the request of U.S. authorities.
Tether CEO Paolo Ardoino said the company maintains direct coordination with authorities in the United States and other countries to help identify and freeze illicit funds. The contrasting accounts place the effectiveness and speed of stablecoin enforcement at the center of the debate.
The report’s allegations could increase scrutiny of stablecoin issuers and their procedures for identifying, monitoring, and freezing wallets linked to sanctions violations. For Tether, the key issue is whether its existing compliance measures and cooperation with law enforcement are sufficient to address concerns raised by U.S. lawmakers.
The allegations do not, by themselves, establish that Tether intentionally facilitated sanctions evasion. Further attention is likely to focus on the evidence behind the report, Tether’s enforcement record, and whether U.S. authorities or lawmakers pursue additional oversight or regulatory measures.
