Senate Democrats say 84% of Iran-linked sanctioned wallets ran on Tether's USDT, and ask Justice and the Treasury what they have done about it

What happened

The minority staff of the Senate Permanent Subcommittee on Investigations, under its ranking member Richard Blumenthal, published "Tethered to Terrorism: Crypto & Iran's Shadow Banking Network" on 28 September 2026. It is a minority report: the chair, Ron Johnson, is copied on the covering letters and did not sign them. The staff collected the transactions of 846 wallets that the Treasury's Office of Foreign Assets Control and Israel's National Bureau for Counter Terror Financing designated between June 2021 and August 2026 as controlled by or associated with Iran, Hamas, Hizballah and the Houthis, and found that "84% have transacted exclusively, or nearly exclusively, in USDT". Its threshold for predominantly is "greater than 80% of the U.S. dollar value of aggregate transactions". The report's first finding is that Tether "has become a primary illicit international payment system for Iran". Its cases include two Central Bank of Iran wallets, named in leaked letters, that received nearly $50m in USDT in April and May 2025; three wallets the staff tie to a broker called the Modex Exchange Company, which took in $575m from April to June 2025 and were not blacklisted; $603m in USDT received over four years by two sanctioned oil smugglers, Alireza Derakhshan and Arash Estaki Alivand; and 39 wallets Israel tied to a Hizballah money launderer in June 2023, of which Tether froze five and left the other 34 until March 2024, while "more than $34.6 million in USDT" moved out. The report says Tether confirmed receiving the subcommittee's letter of 4 June and "has not provided a response as of the publication of this report". Blumenthal sent the report the same day to Attorney General Todd Blanche and Treasury Secretary Scott Bessent, asking each to investigate Tether's anti-money laundering and sanctions compliance and to say by 9 October whether an inquiry into Tether reported in October 2024 had been narrowed, paused or closed. The Treasury letter also asks for records on GENIUS Act rulemaking and Clarity Act negotiations.

Why it matters

The report is an argument about the one control a fiat-backed stablecoin has that a bearer asset does not. Tether, it says, "has the technical means to freeze and block wallets" through a blacklist function in the token contract, and the complaint is that the control was used late and only on instruction: from 2021 to May 2023 Tether "did not appear to freeze any wallets designated by the NBCTF". The economic point is drawn from what did not happen. Bitcoin has no central freeze and should suit a sanctioned state that fears seizure, yet Iran's networks stayed in USDT, which the report reads as Tether having "failed to deter or chill" them. USDC "was extremely limited in the Subcommittee's analysis". So the case is that a freezable dollar token is most useful to a sanctioned user while its issuer freezes slowly, and the remedy it asks for is that issuers with a US nexus be bound by US sanctions law directly. Tether's reply, posted the same day, does not mention the report. It says actions involving USDT froze about $550m in 2026 across wallets US authorities tied to the Central Bank of Iran and Iranian sanctions networks, and that it has frozen more than 22 million USDT in over 40 cases referred by the Israeli bureau. The two documents count different things: the report measures value that moved before or without a freeze, and the post measures value frozen after a designation, so neither answers the other.

What is not settled

The headline share blends two populations the report keeps apart in its findings: 87 per cent of 757 wallets designated by the Israeli bureau, and 57 per cent of 101 designated by OFAC. Those add to 858, twelve more than the 846 in the executive summary, and the report does not say whether some wallets sit on both lists. One of its citations is dated 8 November 2026, six weeks after publication. The reports have not all read the same document. CoinDesk names the body the "Permanent Subcommittee on Intelligence", and it is the Permanent Subcommittee on Investigations. CoinDesk also presents $2bn of transactions last year as the report's estimate; the report gives "an estimated minimum of $2 billion in illicit Iranian cryptocurrency transactions last year" as industry reporting, citing Chainalysis. Raw Story, following The Wall Street Journal, which had the report first and could not be read for this story, has the 846 wallets and the 84 per cent right. A figure of $507m for the Central Bank of Iran's USDT holdings has circulated with the story and appears nowhere in the report. Tether's figures do not reconcile within its own post. The two 2026 freezes it lists are "more than $344 million" in April and "more than $130 million" in July, at least $474m, which it calls together approximately $550m without accounting for the difference. Its subheading gives more than 2,900 investigations supported, over 1,600 of them with US law enforcement; its body gives more than 2,800 and more than 1,500. Whether Justice or the Treasury answers by 9 October is open.