A preliminary Democratic staff report says the stablecoin issuer left dozens of designated wallets open for months. Tether disputes the findings.
A preliminary report from the Democratic staff of the Senate Permanent Subcommittee on Investigations concludes that Tether's USDT stablecoin sits at the center of the financial network Iran and its proxies use to move money around sanctions.
The report, titled "Crypto & Iran's Shadow Banking Network" and dated , was prepared by the minority staff of Sen. Richard Blumenthal. Investigators examined 846 sanctioned wallets connected to Tehran and its proxy groups. More than four in five, 84%, used USDT for all or almost all of their activity.
Three numbers, three populations
The report's figures vary sharply depending on which wallets are counted, and the differences matter:
- Full set, 846 wallets: 84% mostly USDT.
- Israel's counterterrorism-finance designations, 757 wallets: 87%.
- U.S. Treasury OFAC designations, 101 wallets: 57%.
That 30-point gap between the Israeli-designated and U.S.-designated groups is the most interesting finding in the document. It suggests the wallets American authorities have formally sanctioned use a wider mix of assets than the broader network does. Anyone citing the report should use the 84% figure for its central claim.
The freeze failure
The report's sharpest allegation concerns how quickly Tether acts on designations. The report's case study begins in June 2023, when Israeli authorities blacklisted 39 wallets they tied to Hizballah. Five were frozen. The other 34 stayed open until March 2024, and in that window $34.6 million in USDT left them. That is 87% of the designated wallets left open for three quarters of a year.
Tether's position
Tether has pushed back, saying it has frozen about $550 million in assets. Investigators sent Tether a request for information on and say they had received no answer when the report went out, so the company's public rebuttal was not a formal response to the subcommittee.
What to watch
Whether Republican members of the subcommittee endorse the findings, whether the "preliminary" label leads to a fuller report, and whether the Justice Department or Treasury takes enforcement steps. For stablecoin markets, the question is whether regulators treat freeze speed as a compliance standard going forward.