Democrats on the Senate's Permanent Subcommittee on Intelligence published a report alleging that the U.S. dollar-pegged stablecoin Tether has become a significant tool for the Iranian government to conduct transactions that skirt international sanctions.
According to the report, Iran's cryptocurrency-based shadow banking network has processed significant volumes of funds, and Tether has "repeatedly failed" to block Iran-connected wallets. The report stated that "USDT has become a significant financial lifeline within Iran's shadow banking network."
The Democrats cited several compliance shortcomings. Prior to 2024, Tether did not comprehensively and consistently freeze wallets designated by counter-terrorism agencies and continues to fail to proactively block clearly illicit wallets, the report said. When Tether does freeze wallets, it sometimes takes weeks, and the company has sometimes responded to freeze requests without actually blacklisting the wallets.
The report noted that terrorist organizations such as Hamas have shifted to promoting USDT, moving away from transacting in Bitcoin and other cryptocurrencies. The Iranian government made an estimated $2 billion in transactions over the past year, though the report did not provide a total sum specifically for USDT transactions.
Tether responded to the report in a blog post, saying it had "supported nearly $550 million in Iran-linked" freezes. CEO Paolo Ardoino stated that the company remains "in regular and direct coordination with authorities in the United States and around the world to help ensure that illicit funds can be identified and frozen."
