Senate Democrats put Tetherās USDT under the microscope over Iran sanctions evasion
A minority-staff report says most Iran-linked sanctioned wallets moved primarily in USDT, and Democrats want Treasury and Justice to take a closer look
Senate Democrats have a new report, and Tether is the main character. On September 28, 2026, minority staff on the Senate Permanent Subcommittee on Investigations released a document arguing that USDT has become a core tool of Iran’s sanctions-evasion machinery.
The report is titled ‘Tethered to Terrorism: Crypto & Iran’s Shadow Banking Network.’
The findings arrive amid existing tensions between the US and Iran. They also come with a request for federal follow-up, which turns the report from a policy paper into something closer to a warning shot.
What the report found
The 28-page document examined 846 crypto wallets. All of them had been sanctioned or targeted for seizure by one of two bodies between June 2021 and August 2026.
The first is the US Treasury’s Office of Foreign Assets Control, better known as OFAC. The second is Israel’s National Bureau for Counter Terror Financing.
The headline number: 84% of the sanctioned wallets tied to Iran and its affiliated proxies transacted primarily in USDT.
The breakdown gets more pointed when split by designating authority. According to the report, 87% of the 757 wallets flagged by Israel transacted mainly in USDT. Among the 101 wallets designated by OFAC, the figure was 57%.
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The report frames USDT as a financial lifeline for Iran’s shadow banking network. It also links the flow of funds to Iranian proxies, including Hezbollah and Hamas.
One case stands out. A network of sanctioned oil smugglers moved over $603 million in USDT during the period the report covers.
Tether’s response and the pre-2024 problem
Tether moved quickly after the report dropped. The company said it had helped freeze roughly $550 million in Iran-affiliated USDT over the course of 2026.
That total includes significant sums connected directly to the Central Bank of Iran. In April 2026, Tether froze $344 million tied to two wallets identified with the central bank.
The analysis points to inconsistencies in how Tether handled wallet freezes before 2024. The suggestion is that the company’s enforcement was uneven in earlier years, even if its more recent actions have been substantial.
So Tether’s defense rests on its 2026 record. The report’s critique rests on what happened before that.
The referral and the deadline
Senator Richard Blumenthal of Connecticut, who is leading the subcommittee effort, has referred the findings for further investigation. The focus is whether Tether complied with US sanctions and anti-money laundering rules.
Blumenthal’s letter asks the Treasury Department and the Justice Department to respond by October 9, 2026.
A minority-staff report does not carry the weight of a full committee finding. Democrats are not the ones setting the subcommittee’s official agenda here.