Tether’s USDT has become the primary cryptocurrency used across an Iranian shadow banking network that moves funds linked to Iran and regional proxy organizations, according to a preliminary report by the U.S. Senate Permanent Subcommittee on Investigations.
The sub-committee analyzed blockchain transactions involving 846 cryptocurrency wallets sanctioned or targeted for seizure because of their association with
Iran,
Hamas,
Hezbollah, and
the Houthis.
It found that 84% of the wallets transacted exclusively or nearly exclusively in USDT.
The report found an even higher concentration among wallets identified by Israel’s National Bureau for Counter Terror Financing. Of 757 wallets linked to Iranian terrorism financing, 87% predominantly transacted in USDT. Among 101 wallets designated by the U.S. Treasury’s Office of Foreign Assets Control, 57% predominantly transacted in USDT. Bitcoin was the next most-used asset, at 7% and 19%, respectively.
REGULATION | U.S Treasury Sanctions Iranian Bitcoin Exchange
The sub-committee said USDT became the overwhelmingly dominant cryptocurrency in the wallets it examined from 2023 onward. USDC appeared in only a few transactions while other assets including Solana, DogeCoin, Shiba Inu and XRP appeared at negligible levels in the analyzed sample.
2025 RECAP | Illicit Stablecoin Activity Surged to 5-Year High in 2025 with Over 80% Used for Sanctions Evasion
Nearly $50 Million Moved Through Central Bank of Iran Wallets
The investigation identified two wallets attributed to the Central Bank of Iran that received nearly $50 million in USDT during April and May 2025.
According to the blockchain analysis, the funds were subsequently transferred within days to Iranian exchanges including Nobitex and Ramzinex, or to a cryptocurrency mixer.
The sub-committee also identified three wallets associated with the Modex Exchange Company that received nearly $600 million in USDT over several months, including funds from known Iranian money launderers. Separately, the report said the three Modex-associated wallets received $575 million in USDT between April and June 2025.
Two additional wallets linked to the Central Bank of Iran contained $344.2 million in USDT when they were sanctioned by OFAC in April 2026.
REALITY CHECK | Crypto is a ‘Tool of Choice for Sanctions Evasion’ for Iran, Says U.S Treasury
Over $600 Million USDT Network Linked to Iranian Oil and Military Procurement
The report examined wallets belonging to Iranian nationals, Alireza Derakhshan and Arash Estaki Alivand, who were designated by OFAC in September 2025 over their role in an international network of front companies facilitating Iranian oil sales and military procurement.
The sub-committee’s analysis found that the two had received $603 million in USDT over four years, operating almost exclusively in Tether. Less than 1% of the volume was conducted in USDC and Ether.
The funds generally entered through exchanges outside the United States or through repeated multi-million-dollar USDT transfers from unattributed wallets.
The report said the network connected to Iranian financial institutions and regional proxy organizations describing the transactions as part of a broader network capable of moving billions of dollars annually.
REGULATION | U.S. Sanctions 2 Crypto Exchanges for Facilitating Iran Transactions
Crypto Payments Linked to Military Procurement
The investigation also examined cryptocurrency transactions associated with the procurement of components for Iranian military equipment.
The report cited a U.S. civil forfeiture case involving $584,741 in USDT linked to Mohammad Abedini, an Iranian national whose company produced navigation systems found in Shahed drones.
The sub-committee also identified a January 2026 transaction in which a Chinese electronics supplier received $64,000 in USDT from a wallet funded exclusively by the Iran-linked Modex Exchange Company. The supplier advertised drone-related components including semi-conductors of the type found in Shahed and Geran drones.
The report cautioned that the transaction did not establish the final recipient or the components ultimately purchased but said it demonstrated the potential use of cryptocurrency for procurement connected to Iranian military purposes.
REGULATION | U.S. Targets Iran’s Largest Crypto Exchange in Escalation of Financial Pressure Campaign
Report Identifies Delays in Freezing Sanctioned Wallets
A major finding concerns Tether’s ability to freeze USDT held by designated wallets.
The report said Tether has a blacklist function embedded in USDT that allows it to prevent wallets from withdrawing funds and can also destroy funds held in a wallet.
The sub-committee found that between 2021 and May 2023, Tether did not appear to freeze wallets designated by Israel’s counterterror financing authority despite orders identifying addresses controlled by Hamas.
In one case, Israel designated 39 wallets in June 2023 as associated with Hezbollah financier, Tawfiq Muhammad Sa’id Al-Law. Tether initially froze five wallets but did not freeze the remaining 34 until March 2024.
The sub-committee’s blockchain analysis found that more than $34.6 million in USDT moved out of those wallets after the designation, including through Binance, Paribu, and BTCTurk.
REGULATION | Binance Faces U.S. Probe Over Potential Iran Sanctions Violations
The report also found that wallets associated with Gaza Now continued receiving USDT after the organization was sanctioned by OFAC in March 2024. It said publicly-posted wallet addresses continued receiving contributions in 2025 without being frozen.
The investigation further identified Central Bank of Iran wallet addresses publicly posted by Iranian money launderer, Babak Zanjani, in December 2025. According to the report’s review of blockchain records, those addresses had not been blacklisted by Tether as of September 2026.
CRYPTO CRIME | U.S. Seizes Over $80 Million Linked to a Tether Banking Partner
Key Findings
The report’s investigation found that:
USDT was the dominant cryptocurrency across the 846 Iran-linked wallets analyzed.
87% of 757 wallets identified by Israel as linked to Iranian terrorism financing predominantly transacted in USDT.
57% of 101 OFAC-designated wallets predominantly transacted in USDT.
Two Central Bank of Iran wallets received nearly $50 million in USDT in April-May 2025.
Three Modex-associated wallets received $575 million in USDT between April and June 2025.
Iranian oil and military procurement facilitators Derakhshan and Alivand received $603 million in USDT over four years.
More than $34.6 million in USDT moved out of 34 Hizballah-linked wallets after their designation but before Tether froze them.
The subcommittee found USDT was the only stablecoin significantly represented in its analyzed sample.
The report concludes that USDT became a primary cryptocurrency for Iran, Hamas, Hezbollah, and the Houthis beginning in 2023 with its use expanding thereafter. It links that expansion to what it describes as delays and failures by Tether to freeze wallets associated with money laundering and terrorism financing.
REGULATION | Binance Admits to Wrongdoings, to Pay Over $4 Billion Penalty as Founding CEO Steps Down
Stay tuned to BitKE on crypto crime developments.
Join our WhatsApp channel here.
Follow us on X for the latest posts and updates
Join and interact with our Telegram community
________