Senate Report Raises Concerns Over USDT’s Use in Iran-Linked Money Laundering Networks

A report released by Democratic members of the U.S. Senate Permanent Subcommittee on Investigations has raised concerns over the use of Tether’s USDT stablecoin in financial networks linked to Iran and its regional proxies.

The report analysed blockchain transaction data from 846 cryptocurrency wallets that had been sanctioned or targeted for seizure because of alleged links to Iran and associated groups. It found that 84% of the wallets had transacted exclusively or almost exclusively in USDT.

The investigators said USDT has become an important payment mechanism within Iran-linked financial networks, allowing funds to move internationally outside traditional banking channels. The report identified activity involving the Central Bank of Iran, cryptocurrency exchanges, brokers and networks connected to Iranian oil transactions.

The report also cited approximately $603 million in USDT received by wallets linked to two designated Iranian oil facilitators over a four-year period. It said the transactions formed part of broader networks used to facilitate financial activity involving Iran.

The investigators raised particular concerns about Tether's response to wallets associated with sanctioned or illicit activity. The report said that 39 wallets linked by Israeli authorities to a Hizballah financier were identified in June 2023, but only five were blacklisted before the remaining 34 were frozen in March 2024.

According to the report's analysis, more than $34.6 million moved through those addresses after the June 2023 seizure notice and before the subsequent freezes.

The report also examined cryptocurrency activity attributed to the Central Bank of Iran. It said two wallets associated with the bank received almost $50 million in USDT during April and May 2025.

The investigators argued that USDT's liquidity, dollar peg and broad acceptance among cryptocurrency exchanges make it attractive to users seeking alternatives to conventional financial channels. The report said the stablecoin can facilitate cross-border transfers without requiring transactions to pass directly through correspondent banking networks.

Tether has disputed the characterization of USDT as a vehicle that provides sanctioned actors with unrestricted access to international finance. The company said it cooperates with law enforcement and has assisted in freezing nearly $550 million in Iran-linked USDT during 2026.

The company has also pointed to specific freezing actions taken following requests or information from U.S. authorities. In April, more than $344 million in USDT across two addresses was frozen, followed by the designation of those addresses by the U.S. Treasury's Office of Foreign Assets Control. In July, more than $130 million across four additional wallets was frozen.

The Senate report has been referred to the U.S. Department of the Treasury and Department of Justice and calls for further examination of Tether's sanctions and anti-money laundering controls.

The report is an investigative document and does not establish a judicial finding that Tether violated U.S. sanctions or anti-money laundering laws. Its analysis concerns selected wallets linked to Iran and related entities and does not represent the broader population of USDT users or transactions.

The findings have nevertheless placed the issuer's wallet-screening, sanctions monitoring and freezing procedures under increased scrutiny, particularly regarding the timing of action after authorities identify cryptocurrency addresses associated with sanctioned actors.

By fLEXI tEAM