Tether's USDT Stablecoin Enables Iran's Shadow Banking Network

Tether's USDT stablecoin has become a key component of Iran's shadow banking system, allowing the country and its regional proxies to move money beyond traditional financial institutions and U.S. sanctions, according to a new Senate investigation.

The report analyzed blockchain transactions involving 846 cryptocurrency wallets sanctioned or targeted for seizure due to their links to Iran and regional proxy organizations. It found that 84% of these wallets transacted exclusively or almost exclusively in USDT.

The activity was not limited to individual Iranian traders, but also connected Iranian financial interests with organizations such as Hezbollah, Hamas, and the Houthis, facilitating transactions involving sanctioned entities.

The investigators also identified evidence linking the network to the procurement and sale of drones and other military equipment. The scale of some transactions was substantial, with two Iranian nationals later sanctioned by the U.S. receiving approximately $603 million in USDT between 2021 and 2025 through cryptocurrency addresses designated by the Treasury Department.

Tether disputes the report's characterization of its compliance record, saying it has cooperated with U.S. authorities and supported the freezing of nearly $550 million in Iran-linked USDT during 2026.