A 28-page minority staff report asks the Justice and Treasury departments to investigate. Tether counts about $550 million of Iran-linked freezes in 2026 and says its record is public.
The world's largest stablecoin is now the subject of a Senate investigation into Iran's finances.
Democratic investigators on the Senate Permanent Subcommittee on Investigations, led by the panel's top Democrat, Sen. Richard Blumenthal of Connecticut, released a 28-page report on Monday concluding that Tether's USDT has become central to "Iran's shadow banking system." The report is the work of the minority staff, not a finding of the full subcommittee.
"My new PSI report exposes how Tether and its flagship token have become central to Iran's shadow banking system, allowing the Iranian government to fund its regional proxies, commit human rights abuses, and pursue hostile drone and missile programs as they defy our sanctions regime," Blumenthal said.
What the investigators found
Investigators began with 846 wallets that had been sanctioned or blocked over ties to Iran and traced their on-chain activity. Of the 757 wallets they identified as "implicated in Iranian terrorism financing," 87% had "predominantly transacted in USDT," the report said. Iranian crypto exchanges use USDT widely, and it trades more deeply than rival tokens, which the staff cited to explain why Iran-linked actors favor it.
According to the report, Tether did not freeze a number of those wallets despite repeated opportunities. "Outside of sanctions or seizure notices, Tether has also failed to act on wallets that bear strong indicators of illicit finance, despite ample information about their ties to Iranian entities or terrorist organizations being in the public domain," the investigators wrote.
In separate letters, Blumenthal asked Attorney General Todd Blanche and Treasury Secretary Scott Bessent to examine whether sanctions or banking laws had been broken.
The administration ties
The report also points to Tether's links to the Trump administration. Cantor Fitzgerald, the firm Commerce Secretary Howard Lutnick led before joining the government and which his sons now run, acts as a custodian for Tether's reserves. Tether's U.S. arm is run by Bo Hines, who previously led the White House Crypto Council as executive director.
Tether's response
Tether published its own account the same day. By Tether's count, roughly $550 million of Iran-linked USDT has been frozen so far in 2026. More than $130 million of that came in July from four wallets, after the Treasury added four TRON network addresses to its designation of Iran's central bank. The company counts more than 2,900 investigations it has assisted around the world, over 1,600 of them with U.S. agencies. Its freezing policy now follows the Treasury's sanctions list, and it applies that list to wallets that receive tokens in secondary trading.
"Tether has consistently demonstrated that USD₮ is not a haven for sanctioned actors, terrorist organizations or criminal networks," said Chief Executive Paolo Ardoino. "The record is public."
What to watch
The report and Tether describe the same record differently. Tether points to freezes tied to formal designations and law enforcement requests, while the report faults it for wallets it did not freeze without them. Any response from the Justice or Treasury departments to Blumenthal's letters, and whether Republican members of the subcommittee take up the findings, will determine whether the report becomes an enforcement matter or remains a minority document.