Skip to content
Blockchain Posts

regulation

Senate report calls USDT Iran's sanctions 'superhighway,' refers Tether to Treasury and DOJ

Blumenthal's PSI report finds 84% of 846 sanctioned Iran-linked wallets used USDT and asks Treasury and DOJ for an update by October 9.

by 4 min read
regulationtethersanctionsstablecoinus-senate

Senator Richard Blumenthal and the Democratic staff of the Senate Permanent Subcommittee on Investigations (PSI) released a 28-page report titled "Tether and Terrorism: Cryptocurrency and Iran's Shadow Banking Network" on September 28, 2026, and referred its findings to Treasury Secretary Scott Bessent and Attorney General Todd Blanche for investigation, according to The Block, Decrypt and CoinDesk. The subcommittee asked both departments to say by October 9 whether either narrowed, paused or closed any prior inquiry into the issuer.

What the report claims

PSI staff analyzed 846 wallets sanctioned or targeted for seizure by OFAC and Israel's counter-terror financing bureau over links to Iran, Hamas, Hezbollah and the Houthis. The topline finding:

  • 84% of those wallets "have transacted exclusively, or nearly exclusively, in USDT."
  • Two Iranian oil smugglers moved more than $603 million in USDT between 2021 and 2025.
  • $34.6 million continued flowing through wallets after OFAC designation.
  • Before 2024, Tether "did not consistently freeze" designated wallets.

Blumenthal's framing, quoted in the report and the accompanying press briefing:

"Tether is a preferred payment system for terrorist organizations — operating as a superhighway for the Iranian government."

The senator described US enforcement to date as "none, zero."

Why the referral matters

A PSI referral is not a charging instrument. What it does is impose a public reporting deadline on Treasury and DOJ, and it enters the record a specific dataset — the 846 wallets — that agencies now have to explain their treatment of. The letters to Bessent and Blanche ask whether either department:

  • Opened, narrowed, paused or closed any Tether-related inquiry.
  • Coordinated with OFAC on designation and freeze timelines.
  • Has considered enforcement against Tether entities under the AML or sanctions regimes.

Congress does not run those investigations; but a subcommittee that publishes an on-chain dataset and formally asks for status becomes an anchor for future oversight hearings. If the report's dataset holds up under scrutiny, the follow-up will be about why freezes did not track designations.

Tether's response

Tether issued a statement, quoted by Decrypt and Cointelegraph, citing $550 million in Iran-linked USDT freezes during 2026 and noting cooperation with law enforcement and the transparency of on-chain records. The company did not directly rebut PSI's headline finding on the 846-wallet dataset.

Numbers block

  • Report length: 28 pages
  • Wallets analyzed: 846, sanctioned or targeted by OFAC or Israel
  • Share transacting "exclusively or nearly exclusively" in USDT: 84%
  • Iranian oil-smuggling USDT flows (2021–2025): >$603M
  • Post-designation flows through sanctioned wallets: $34.6M
  • Referred to: Treasury Secretary Scott Bessent, Attorney General Todd Blanche
  • Response deadline: October 9, 2026
  • Tether freezes cited in 2026: ~$550M Iran-linked USDT
  • Sources: The Block, CoinDesk, Decrypt, Engadget

What to watch

  1. The October 9 responses. Both Treasury and DOJ have to say whether prior inquiries were narrowed or closed. A non-answer would harden congressional oversight into subpoenas at the next PSI hearing.
  2. OFAC action on the 846 wallets. Any addition to SDN designation now would look like a downstream response to the report. Tracking OFAC's Specially Designated Nationals updates against the report's addresses will show whether the executive branch is picking up the file.
  3. US-authorized stablecoin issuers' compliance posture. Circle and Paxos will read the report as a competitive frame. Expect USDC and USDG marketing to lean on freeze latency and OFAC-list integration in the coming weeks.

Context

This is a Democratic staff report from a minority-led subcommittee — its political weight depends on what Republican-led committees in the House do next. The precedent it recalls is the 2013 PSI report on offshore corporate tax avoidance, which took two years to translate into legislative pressure. On the enforcement side, the report echoes and expands earlier Chainalysis work on Iranian OTC brokers and the SDN listings of Nobitex intermediaries. What is new is the wallet-level cross-reference between OFAC and the Israeli counter-terror financing bureau — a dataset the US executive branch has not itself published.

Related stories