One of the largest stablecoins has been at the heart of a US Senate investigation into sanctions evasion. A report seen by The Wall Street Journal shows how the Senate Permanent Subcommittee on Investigations, chaired by Senator Richard Blumenthal, detected Iran’s reliance on Tether USDT to bypass US sanctions, finance proxies including Hezbollah and bolster arms programs.
The subcommittee explored 846 wallets sanctioned by US and Israeli authorities and found that 87% of them transacted exclusively or almost exclusively in thestablecoin USDT.
Investigation officers say Tether USDT has been a pillar of Iran’s underground banking system, enabling it to move money outside SWIFT and the banking system and circulate it to contacts. The investigation handed evidence to the Justice Department and Treasury department as US Government presses on with ‘Operation Economic Outcast’ fighting the fallout of the Iranian strikes earlier in the year.
How Iran Does it With Tether USDT
Wallets, oil revenues and proxy net. The report examines how volatile crypto has transitioned to dollar-stablecoins for the purposes of evasion. Finally, the stability of USDT, the deep exchanges liquidity and low-fee Tron transfers helps trade settlement. Blockchain analysis traces the inflows of the agencies affiliated with the Islamic Revolutionary Guard Corps exchanging black-market oil sales into Tether USDT to ultimately conceal its source.
Scale can be measured through blockchain reveals. Chainalysis estimates the Iranian crypto scene conducted over $7.78 billion in transaction volume during the past year where IRGC-affiliated entities conducted nearly half the on-chain activity during late 2023. These results are consistent with a Justice Department forfeiture action, United States v.
All Tether USDT (e.g. a case seeking to confiscate $61 million worth of work was conducted from ten different Tron addresses ranging from late 2024 through March 2025).
The complaint alleges 1.5 billion dollars-worth of transactions and transfers from Hexa Whale and Blessed Trust consisting of 443 million dollars-worth of Chinese value had been shifted from late 2024 through March 2025 via Binance accounts.
Also Read: US-Iran Talks: Bitcoin Rebounds as Hormuz Reopening Plan Emerges
Significance for issuers, venues, and investors
As far as crypto, the paper raises the stakes on compliance requirements on stablecoin issuers and venues. Among other things, Tether USDT displays its Freeze capabilities and cooperation with law enforcement, but the report raises questions on controls on secondary-trading on Tron where most Tether USDT changes hands. Investors and institutions may move into regulated alternatives like Circles USDC, PayPal’s PYUSD and bank tokens via EU MiCA and US stablecoin proposals.
Venues, OTC desks and custodians need to implement additional compliance measures for sanctions screening, wallet clustering and the travel rule. Ethereum and Tron developers will witness explosion of demand for risk scoring and analytics from Chainalysis, Nansen, and Arkham Intelligence.
Regulators will probably appeal to the paper to impose fiAM capabilities on issuers including monitoring and sanctions blocking. Significance: links crypto enforcement to commodity trade laundering, where China remains the top destination of Iranian crude at 1.4m bbl/d in 2025.
Also Read: US Sanctions Iranian BitBank Over Alleged Bitcoin Transfers to IRGC
What Happens Next: Enforcement and Market Framework
In the short term, another OFAC designations, blackage ts of wallets and forfeitures are likely. Treasury may seek authority to block foreign platforms used for Iranian activity. For Tether USDT, focus will be on the quality of reserve attests, audits, and consistent cross-chain freezing. Over time, three threads align: dollarization of crypto through stablecoins, shifting of illicit usage from Bitcoin to stablecoins for efficiency, and realization of crypto compliance as a foreign policy element.
Congressional proposals may impose issuer liability and auditor requirements, altering the competitiveness of regulated tokens like USDT, USDC and others. The investigation does not claim Tether USDT knowingly enabled sanctions evit ion, but reveals USDT intertwined with Iran offshore outside the formal financial system.
For an industry seeking institutional customers, the episode demonstrates that scale demands geopolitical accountability and that a credible compliance process must be proportional to liquidity and peg stability.
Also Read: Tether Funds Stuck at EQIBank as Liquidation Risk Raises Questions
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