Senate Democrats' report calls Tether a 'lifeline' for Iran's regime

Democrats on a US Senate subcommittee have published a report arguing that Tether's dollar-pegged stablecoin USDT has become a go-to tool for the Iranian government to bypass sanctions, CoinDesk reports.

The report, released on Monday by Democrats on the Permanent Subcommittee on Intelligence of the Senate's Homeland Security and Governmental Affairs Committee, says: "USDT has become a significant financial lifeline within Iran's shadow banking network." Sen. Richard Blumenthal is the subcommittee's lead Democrat. The Wall Street Journal first reported on the document.

Freezes that come late or not at all

According to the report, "Iran's cryptocurrency-based shadow banking network has processed significant volumes of funds and implicates various Iranian interests", and Tether has "repeatedly failed" to block Iran-connected wallets. When the company does freeze wallets, it sometimes takes weeks, and it sometimes responds to requests without actually blacklisting the wallets, the report claims.

"Prior to 2024, Tether did not comprehensively and consistently freeze wallets designated by counter-terrorism agencies and continues to fail to proactively block clearly illicit wallets," it says. That "absence of deterrence invited abuse", according to the report: terrorist organisations such as Hamas shifted from transacting in Bitcoin and a mix of cryptocurrencies to promoting USDT.

The report does not give an overall total for how much USDT the Iranian government has transacted, but says the government made an estimated $2 billion in transactions last year. It also casts Iran's use of USDT as a wider indictment of crypto, saying "cryptocurrencies are actively undermining the attempts of the United States and its allies to prevent the Islamic Republic's regional terrorism."

Tether points to $550m in freezes

In a blog post on Monday, Tether said it had "supported nearly $550 million in Iran-linked" freezes, listing several recent actions it said it took at the behest of US authorities.

"As governments intensify efforts to disrupt sanctions evasion and terrorist financing, we remain in regular and direct coordination with authorities in the United States and around the world to help ensure that illicit funds can be identified and frozen," Tether's chief executive, Paolo Ardoino, said in the post.

Sources

• CoinDesk