A Senate report claims Iran is benefiting from Tether's USDT stablecoin to the point where it has become a "significant financial lifeline" within the country's "shadow banking network." Iran is using Tether as an international payment system to bypass sanctions on its banks and to fund terrorist proxy organizations.

Sen. Richard Blumenthal, ranking member of the Senate Permanent Subcommittee on Investigations, led the report. The subcommittee examined 846 sanctioned cryptocurrency wallets linked to Iran and regional proxies, finding that 84 percent used USDT exclusively or almost exclusively to move money and prop up Iran's currency. The report claims the network supports terrorist groups and is used to buy and sell drones and military equipment.

The report also says that before 2024, Tether failed to "comprehensively and consistently freeze" flagged wallets and "continues to fail to proactively block clearly illicit wallets." Blumenthal called on the Justice and Treasury departments to investigate Tether for potential sanctions violations.

Tether said it helped freeze almost $550 million in USDT linked to Iran this year. CEO Paolo Ardoino said USDT is not a haven for sanctioned actors, and public blockchains give authorities visibility that cash does not.