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Tether along with its digital token USDT has become foundational to “Iran’s shadow banking apparatus” as well as the funding mechanisms of militant organizations, according to a fresh congressional inquiry spearheaded by Senator Richard Blumenthal and published on Monday.
Within the 28-page document, Blumenthal, who serves as the lead Democrat on the Senate Permanent Subcommittee on Investigations, stated that democratic staff members scrutinized on-chain ledger records across 846 digital wallets that faced sanctions or restrictions due to Iranian ties.
“My new PSI report exposes how Tether and its flagship token have become central to Iran’s shadow banking system, allowing the Iranian government to fund its regional proxies, commit human rights abuses, and pursue hostile drone and missile programs as they defy our sanctions regime,” Blumenthal noted via an official release.
The documentation revealed that financial channels in Iran depend heavily on USDT, noting that 87% out of 757 wallets “linked to terrorism financing involving Iran primarily conducted transactions utilizing USDT.”
The investigators observed that Iran’s preference for USDT comes as no surprise given how widely local digital currency exchanges adopt it alongside the superior liquidity offered by Tether’s asset compared to alternative options. Additionally, the probe asserted that Tether repeatedly neglected to freeze and blacklist targeted wallets.
“Beyond formal sanctions or asset seizure orders, Tether has likewise failed to take action against wallets displaying clear signs of illicit financial activity, even when extensive public domain data tied those addresses to Iranian actors or terrorist groups,” remarked the investigators.
In formal letters dispatched to Attorney General Todd Blanche and Treasury Secretary Scott Bessent, Blumenthal further demanded that they initiate probes into potential infractions against banking regulations and sanctions. The Wall Street Journal originally reported on the existence of this new assessment.
Trump connections
The investigative paper and Senator Blumenthal additionally pointed out ties linking Tether to the Trump administration, specifically highlighting Commerce Secretary Howard Lutnick. Prior to entering government service, Lutnick directed Cantor Fitzgerald, an institution serving as a financial custodian for Tether. Leadership at that organization has since passed to Lutnick’s offspring. Meanwhile, Bo Hines, former executive director heading the White House Crypto Council, currently functions as CEO of Tether U.S.
Because of these associations with the United States, Blumenthal expressed apprehension that foreign opponents could jeopardize national security.
“Furthermore, given Tether’s deep connections with the Trump Administration, its continuing use by the Iranian regime raises questions as to whether Tether has received lax enforcement and lenient oversight over its anti-money laundering obligations from relevant federal authorities,” he stated.
On Monday, Tether issued a public statement asserting that it assisted in freezing approximately $550 million worth of Iran-associated USDT throughout the past year.
“Tether has consistently demonstrated that USD₮ is not a haven for sanctioned actors, terrorist organizations or criminal networks,” expressed Paolo Ardoino, CEO of Tether, in his commentary. “Public blockchains provide authorities with a level of visibility into the movement of funds that simply does not exist with cash, and Tether can act when credible information is provided by law enforcement.”
Originally published at https://www.theblock.co/news/regulation/2026-09-28-tethers-usdt-center-iran-shadow-banking-network-new-senate-report-says-417094.
