Investigators working for the minority on the Senate Permanent Subcommittee on Investigations say 84 per cent of 846 sanctioned wallets linked to Iran moved money almost entirely in USDT. Tether rejects the characterisation and points to roughly 550 million dollars it froze this year. The percentage is real, and it does not mean what it first appears to mean.
Key takeaways
- A 28-page report titled Tethered to Terrorism was released on 28 September 2026 by Senator Richard Blumenthal, ranking member of the Senate Permanent Subcommittee on Investigations. It is minority staff work, not a bipartisan subcommittee finding.
- Of 846 crypto wallets already sanctioned or named in seizure actions over links to Iran and groups it backs, the report says 84 per cent transacted exclusively or almost exclusively in USDT.
- That figure describes a pre-selected sample of addresses investigators had already identified as illicit. It is not a measurement of how much of Iran’s economy runs on Tether.
- The report alleges that before 2024 Tether did not comprehensively and consistently freeze wallets flagged by counter-terrorism agencies, and that in one instance 34.6 million dollars kept moving after designation.
- Blumenthal referred the findings to the Treasury and Justice departments and asked for investigations into Tether’s anti-money-laundering and sanctions compliance. No charges have followed.
The report comes from one side of the subcommittee
The document was published on 28 September 2026 and runs to 28 pages. It was produced by the minority staff of the Permanent Subcommittee on Investigations and released by Blumenthal in his capacity as ranking member.
That provenance matters for reading it. A minority staff report is an investigative product authored by one party on a committee. It carries the research capacity of a Senate subcommittee, including subpoena-backed context and access to government data, but it is not an agreed finding of the subcommittee as a whole, and it has no legal effect. Its practical weight comes from the referral that accompanied it: Blumenthal sent the material to Treasury and the Justice Department and asked both to examine whether Tether has met its obligations.
The senator was blunt in public. He described the stablecoin as not just a path but a superhighway, for Iran’s sanctions evasion and for money laundering and trafficking more generally. His own announcement also framed Tether as a firm linked to Howard Lutnick, a political line that sits alongside the compliance argument rather than inside it.
The 84 per cent figure describes a sample, not an economy
This is the number that will travel, so it is worth being precise about what was counted.
Investigators took 846 cryptocurrency wallets that had already been sanctioned by American authorities or named in seizure proceedings, in each case over connections to Iran or to regional groups Tehran supports. They then examined the blockchain record for those specific addresses. In 84 per cent of them, the transactions were conducted exclusively or nearly exclusively in USDT.
The sample was therefore assembled from addresses that enforcement bodies had already flagged. It says something real and useful: when wallets of this kind move value, they overwhelmingly reach for one instrument rather than spreading across many. It does not establish that 84 per cent of Iranian cross-border payments use Tether, nor that most USDT activity is illicit. Those are different claims requiring different evidence, and the report does not make them.
What the report says Tether did, and failed to do
The compliance allegations are narrower than the headline and harder to wave away.
According to the report, before 2024 Tether did not comprehensively and consistently freeze wallets that counter-terrorism agencies had flagged. It cites one case in which 34.6 million dollars continued to move through sanctioned wallets after they had been designated. The report also argues that the company continues to fail to block clearly illicit wallets proactively, meaning before a government designation names them.
That last point is the substantive dispute. Freezing an address after an agency designates it is a reactive obligation that Tether does carry out. Identifying and blocking an address because its behaviour looks illicit, ahead of any designation, is a different and more demanding standard, closer to what a bank is expected to do with a suspicious account. Whether an issuer of a widely circulating token should be held to it is a genuinely open regulatory question, not a settled rule the company has broken.
Tether’s answer is a ledger of freezes
The company rejects the framing and answers with enforcement numbers of its own.
Actions involving USDT froze roughly 550 million dollars across wallets that American authorities had linked to Iran’s central bank during 2026, including more than 344 million dollars in April and over 130 million in July. Chief executive Paolo Ardoino has said USDT is not a haven for sanctioned actors, terrorist organisations or criminal networks.
Both things can be true at once, and that is the uncomfortable part. Tether can be the most responsive large issuer when a designation arrives and still be the instrument of choice for the wallets in the report, because responsiveness after the fact does not prevent the use that came before it. The two sides are arguing about different moments in the same sequence.
A dollar token is most useful where dollars are hardest to get
The reason USDT recurs in this material is mundane rather than conspiratorial.
A stablecoin is designed to hold a value very close to one United States dollar, which removes the problem that makes Bitcoin or Ether awkward as payment: a price that can move sharply within hours. USDT behaves as a transferable dollar unit on public blockchains, and moving it requires a wallet rather than a correspondent bank.
For years American sanctions have severely restricted Iran’s access to the international financial system, making Western banks, dollar clearing and ordinary settlement routes difficult or unavailable. A token that offers dollar stability without a bank in the middle is therefore valuable in precisely the places where banking access has been cut off. That is also why it shows up in an informal transfer sector, the kind of broker-based network the report calls shadow banking.
There is a counter-current worth naming. Moving value on a public ledger is not anonymous. The 846 wallets were traced because the record is permanent and open, which is the same property that let investigators produce the figure now being used against the issuer.
The report lands while the rulebook is still unfinished
Timing is what gives this document its leverage.
The United States already has a stablecoin law. The GENIUS Act was enacted on 18 July 2025 as Public Law 119-27, after passing the Senate 68 to 30 and the House 308 to 122. It builds a federal framework for payment stablecoin issuers, with those above 10 billion dollars in market value falling under Federal Reserve oversight and smaller ones supervised at state level or by the Office of the Comptroller of the Currency, alongside requirements for regular audited reporting on reserves.
The parts that bear directly on this report are the parts that are not finished. Treasury issued a proposed rule in September 2025 setting out the Bank Secrecy Act and sanctions compliance obligations that would apply to issuers, and another in April 2026 defining when a state regime counts as substantially similar to the federal one. Regulators then missed their 18 July 2026 deadline for final rules. A Stablecoin Certification Review Committee, chaired by the Treasury Secretary and including the heads of the Federal Reserve and the FDIC, exists to assess state frameworks.
So the question of exactly what an issuer must do about suspicious wallets is, at this moment, a proposal rather than a binding standard. A report alleging insufficient proactive blocking arrives into that gap, and arguing about an unfinished rule is considerably easier than arguing about a finished one.
Where the disagreement actually sits
Strip away the rhetoric and three real disputes remain.
The first is reactive versus proactive duty, described above: whether freezing on designation discharges an issuer’s obligation or whether it must act on behaviour first. The second is where liability belongs, with the issuer of a token, the exchanges and brokers converting it to local currency, or the enforcement agencies that designate addresses. The informal brokers at the edges of this network, not the token itself, are where value actually enters and leaves the Iranian economy.
The third is harder and less discussed. If illicit flows concentrate in one transparent, traceable instrument, enforcement agencies gain a visibility they would not have if the same value moved through cash, gold, trade mis-invoicing or informal transfer networks. Whether concentration in USDT is therefore a net problem or a net advantage for investigators is a serious question, and this report does not attempt to answer it.
What to watch next
Four things will show whether this goes beyond a press cycle.
Whether Treasury or the Justice Department act on the referral, since a minority report has no force of its own and the referral is the mechanism that could give it some. Whether the final GENIUS Act rules, already overdue, define proactive blocking obligations for issuers in the terms this report assumes. Whether Tether publishes anything about blocking wallets before designation, which is the specific gap alleged. And whether any of this attracts Republican support on the subcommittee, because a bipartisan follow-up would change the document from an argument into a process.
Frequently asked questions
What is USDT?
It is a stablecoin issued by Tether, a token designed to track the value of the United States dollar so that one unit stays close to one dollar. It circulates on public blockchains and is one of the most heavily used instruments in the cryptocurrency market, largely because it offers a stable unit of account without the price swings of Bitcoin or Ether.
Does the report prove Tether broke the law?
No. It is an investigative report by minority staff on a Senate subcommittee, not a court finding or a regulatory determination. It alleges compliance failures and refers the matter to the Treasury and Justice departments for examination. No charges or penalties have followed from it.
Does 84 per cent mean most Iranian money moves through Tether?
No, and this is the most common misreading. The figure describes 846 wallets that authorities had already sanctioned or named in seizure actions. Within that pre-selected group, 84 per cent transacted almost entirely in USDT. It is a statement about the behaviour of flagged addresses, not a measure of Iran’s overall financial activity.
What has Tether said in response?
The company rejects the characterisation. It points to roughly 550 million dollars frozen during 2026 across wallets American authorities linked to Iran’s central bank, including more than 344 million dollars in April and over 130 million in July. Its chief executive, Paolo Ardoino, has said USDT is not a haven for sanctioned actors, terrorist organisations or criminal networks.
If blockchains are public, how does this help anyone evade sanctions?
Evasion here is not about hiding the record but about avoiding the gatekeepers. Sanctions work largely by cutting access to banks and dollar clearing, so a transfer that needs neither still bypasses the restriction even when it is visible on a ledger. The trace only becomes useful once an address is identified and attributed to a real party, which is the work the report describes.
Is there a law covering stablecoin issuers already?
Yes. The GENIUS Act became law in July 2025 and sets out a federal framework, including Federal Reserve oversight for issuers above 10 billion dollars in market value and audited reserve reporting. The detailed compliance rules on sanctions and anti-money-laundering obligations are still at proposed-rule stage, and regulators missed their July 2026 deadline for finalising them.
Sources and further reading
- Permanent Subcommittee on Investigations: the report Tethered to Terrorism, Crypto and Iran’s Shadow Banking Network, published 28 September 2026 on the Senate Homeland Security and Governmental Affairs Committee site
- Office of Senator Richard Blumenthal: press releases announcing the report and the referral to the Treasury and Justice departments
- Decrypt and Engadget: reporting on the report, the superhighway remark and the response from Tether
- Law360 and Coingape: coverage of the findings, the sample of 846 wallets and Tether’s freezing figures
- Visione Digitale: Italian-language summary of the report, including the caution that the 84 per cent figure applies to a pre-selected sample
- Paul Hastings and Wolters Kluwer: reference material on the GENIUS Act and the state of Treasury rulemaking
Surfaced from the manual signal “senate report on stablecoin use in sanctions evasion”. AI-assisted draft, editorially reviewed.
