Tether Faces Senate Scrutiny Over Alleged Iran-Linked USDT Use

Tether, the company behind the world's largest stablecoin, is under fresh pressure in Washington. A new report from Democratic investigators on the Senate Permanent Subcommittee on Investigations alleges that Tether's USDT has become a key tool for Iran-linked networks trying to get around US sanctions, The Block and other outlets reported on September 28.

Tether strongly disputes the picture painted by the report, pointing to hundreds of millions of dollars it says it has helped freeze.

What the report alleges

According to coverage of the report:

• Of 846 crypto wallets sanctioned over ties to Iran, about 84% transacted exclusively or almost exclusively in USDT.
• Investigators said Tether had "repeatedly failed" to block wallets tied to Iranian exchanges, brokers and terrorist organizations quickly enough, sometimes taking weeks to act.
• In one case, the report said, $34.6 million kept moving through wallets after authorities had sanctioned them.

Following the findings, Senator Richard Blumenthal called on the Treasury and Justice departments to look into potential sanctions violations.

It's important to note that these are allegations from one side of a Senate subcommittee. They are not findings by a court or a regulator.

Tether's response

Tether pushed back, saying it works closely with authorities around the world. The company said it has helped freeze nearly $550 million in Iran-linked USDT during 2026, including:

• more than $344 million linked to the Central Bank of Iran, frozen in April, and
• more than $130 million across four wallets this year.

Tether also said its cooperation with law enforcement globally has led to more than $4.9 billion in assets being frozen, over $2.4 billion of it connected to US authorities.

Why it matters

USDT is the backbone of much of the crypto market, used for trading, payments and savings, especially in countries with unstable currencies. That reach is exactly why it draws scrutiny. Regulators want to know that a dollar-linked token used worldwide can't easily be used to dodge sanctions.

The report lands as US stablecoin rules are being filled in under the GENIUS Act, and it's likely to add pressure on issuers to show they can act quickly against illicit use.

The bottom line

Senate Democrats say Iran-linked networks lean heavily on USDT; Tether says it's one of the most active firms in freezing illicit funds. The question now is whether the Treasury or Justice Department takes the matter further.

This article is for information only and is not financial or legal advice. The claims described are allegations from a Senate report and have not been proven in court.

Sources: The Block, September 28, 2026; CoinDesk; Cointelegraph; statements from Tether.