Iran has been leaning on Tether’s dollar-pegged USDT to dodge a U.S. sanctions dragnet and move money for the regime and proxies such as Hezbollah, according to a new Senate Democrats report.

The Permanent Subcommittee on Investigations says the token has become a primary payment rail for Tehran and a funding tool for terrorist proxy groups, reports The Wall Street Journal, which viewed a copy of the findings.

Tether’s USDT accounts for about 60% of all stablecoins by market capitalization. Because the token tracks the dollar, it is less volatile than other crypto — making it useful for payments and, the Journal notes, for money laundering.

Treasury has been tightening the economic squeeze since U.S. military strikes in Iran earlier this year, including August’s Operation Economic Outcast.

Sen. Richard Blumenthal (D-Conn.) led the probe, which reviewed 846 wallets sanctioned by the U.S. and Israeli governments over Iran ties and found that 84% of them traded exclusively or almost exclusively in USDT.

Blumenthal told the Journal the report “exposes how Tether and its flagship token have become central to Iran’s shadow banking system, allowing the Iranian government to fund its regional proxies, commit human-rights abuses, and pursue hostile drone and missile programs as they defy our sanctions regime.”

A Tether spokesman did not return requests for comment. The company has worked with law enforcement to freeze some regime-linked wallets.

Iran may be easing off: TRM Labs data shows USDT’s share of volume in Iran-attributed wallets fell from 72% in 2024 to 67% in 2025, and to 14% of on-chain volume in August.

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