A US Senate report released by Senator Richard Blumenthal (D-CT) found that 84% of 846 cryptocurrency wallets sanctioned or targeted for seizure over ties to Iran and its regional proxies transacted exclusively, or nearly exclusively, in Tether's USDT stablecoin. The report, titled "Tethered to Terrorism," was prepared by Democratic staff of the Senate Permanent Subcommittee on Investigations, where Blumenthal serves as ranking member.

The analysis draws on blockchain records for wallets designated by the Treasury's Office of Foreign Assets Control and Israel's National Bureau for Counter Terror Financing between June 2021 and August 2026. The headline figure rests unevenly on the two datasets: 87% of the 757 wallets designated by the Israeli bureau transacted predominantly in USDT, against 57% of the 101 wallets designated by OFAC.

Blumenthal described the stablecoin in stark terms during an appearance on CNBC's Squawk Box on Tuesday. The token was "not just a path, it's a superhighway," he argued, for the Iranian government's sanctions evasion, money laundering and trafficking more broadly. He also stated that enforcement by Treasury and the Justice Department had been "none, zero."

How large was the sanctioned network?

The subcommittee traced two sanctioned Iranian oil smugglers, Alireza Derakhshan and Arash Estaki Alivand, who moved more than $603 million in USDT between 2021 and 2025. Their network reached Hizballah, the Houthis and Iranian financial institutions. The report cites evidence that the same infrastructure was used to buy and sell drones and other military equipment.

The report's compliance findings are equally pointed. Before 2024, it says, Tether did not "comprehensively and consistently freeze" wallets designated by counter-terrorism agencies. In one case, $34.6 million continued to move through sanctioned wallets after designation. The subcommittee also notes that Tether has described its compliance with OFAC sanctions as "voluntary" and says it follows OFAC "guidelines" — a framing the staff contrasts with the binding obligations placed on banks. Hamas, the report adds, shifted from Bitcoin and a mix of tokens toward promoting USDT.

What does Blumenthal want from Treasury and DOJ?

Blumenthal has written to Treasury Secretary Scott Bessent and Attorney General Todd Blanche, asking both departments to investigate Tether's anti-money laundering and sanctions compliance. He argues the administration's oversight of crypto firms has "undermined our own national security interests."

The report also draws attention to Cantor Fitzgerald, which owns 5% of Tether and holds a large share of its assets. The bank was run until recently by Commerce Secretary Howard Lutnick and is now controlled by his children. Citing Bloomberg reporting from March, the report notes Tether lent those children money to buy out their father's stake when he divested upon nomination.

The subcommittee wrote to Tether in June seeking information on its handling of Iranian transactions. The company confirmed receipt but had not replied by the time of publication.

How did Tether respond?

Tether published a statement the same day the report appeared, without mentioning the subcommittee or its findings. The company said actions involving USDT froze roughly $550 million across wallets that US authorities linked to Iran's central bank during 2026, including more than $344 million in April and over $130 million in July. Across all cases, Tether puts the total frozen at more than $4.9 billion, working with over 340 agencies in 67 countries.

"Public blockchains provide authorities with a level of visibility into the movement of funds that simply does not exist with cash," Tether CEO Paolo Ardoino said in the statement.

The report lands amid an escalating regulatory posture toward Iran's digital asset activity. In May, FinCEN issued an alert describing Iran's stablecoin use as including "minting and moving between large volume stablecoin issuers." In August, Treasury widened its campaign by giving itself the power to sanction any foreign person operating in Iran's digital asset sector — a new enforcement tool that could yet be applied to issuers whose tokens dominate sanctioned networks.