US senator urges Treasury and DOJ to investigate Tether over Iran-linked USDT

US authorities are expanding the investigation of the crypto system that Iran is reportedly using to transfer money, now putting Tether at the center of the issue. On September 28, Senator Richard Blumenthal of the Senate Permanent Subcommittee on Investigations (PSI) called on the Treasury and Justice Department to look further into Tether. The company responded and stated that it has assisted in freezing almost $550 million in USDT associated with Iran in 2026.

In the eyes of global crypto firms, their more pertinent fear does not lie within a short-term market crash but the imminent rise in sanctions and compliance issues regarding the services offered by their companies and the way funds flow through their platforms.

Two sides of the same wallet data

On September 28, Blumenthal made the PSI results public in Washington, D.C. Investigators looked into 846 wallet accounts that had been flagged or were being targeted for confiscation due to their connections to Iran. According to the report, 84% of the wallets made transactions exclusively or almost exclusively in USDT.

“Tether and its flagship token have become central to Iran’s shadow banking system” – Sen. Richard Blumenthal, September 28 PSI release

He referred the findings to Treasury Secretary Scott Bessent and Attorney General Todd Blanche for possible violations of sanctions and the Bank Secrecy Act. Blumenthal also noted Cantor Fitzgerald’s approximately 5% stake in Tether, as well as its connection with Commerce Secretary Howard Lutnick’s family.

The following day, Tether made a statement explaining that it was responsible for the freezing of approximately $550 million in USDT related to Iran’s central bank and other sanctioned entities in 2026.

“USD₮ is not a haven for sanctioned actors…” – CEO Paolo Ardoino, Tether’s September 28 statement

According to Tether, the company cooperates with over 340 law enforcement agencies in 67 countries.

Enforcement is climbing the whole stack

The Tether dispute forms only a part of a wider campaign launched by the US against Iran. On August 24, the Treasury Department launched Operation Economic Outcast, which aims to include nearly 60 entities linked to Iran, in addition to making digital assets one of the five designated sectors subject to sanctions.

According to TRM Labs, this development raises the chances of secondary sanctions being imposed on exchanges, OTC brokers, payment service providers, and other entities supporting Iran’s cryptocurrency industry.

On September 14, the federal prosecutors filed a civil forfeiture case to recover approximately $61 million in cryptocurrencies believed to be linked to black market oil sales from Iran. The prosecutors informed that a related group of wallets has processed funds of about $1.5 billion regarded as illegal.

Chainalysis also reported that IRGC-related wallets received more than $3 billion up to the year 2025.

Why exchanges are watching more than Tether

The US authorities are treating stablecoins, exchanges, wallets and crypto-for-oil networks more and more as a part of the same sanctions environment. Cryptopolitan has recently reported that the US authorities are investigating whether Binance has knowingly processed Iran-related trades.

For global crypto firms, the pressure is likely to show up in stricter checks on who they do business with and greater exposure to secondary sanctions. What happens next depends on whether Treasury or the Justice Department follows up on Blumenthal’s referral, and whether that leads crypto companies to tighten how they screen for Iran-linked activity.

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