Tether CEO says Iran-linked USDT activity fell 94% after wallet freezes, disputing Senate report on sanctions evasion

Tether CEO Paolo Ardoino says freezing wallets has cut Iran-linked USDT transaction volumes by 94%, pushing back on a Senate report that called the stablecoin central to Iran’s shadow banking system.

In an October 19 post, he said Tether froze targeted addresses an average of four weeks before US and Israeli sanctions designations, a claim the company has not backed with published data.

Senate investigation identifies widespread USDT use

The dispute follows a September 28 report released by Democratic investigators on the Senate Permanent Subcommittee on Investigations, led by Senator Richard Blumenthal. The inquiry examined blockchain transaction data from 846 cryptocurrency wallets sanctioned or targeted for seizure because of their alleged connections to Iran and its regional proxies.

The report found that 84% of the wallets had transacted exclusively or almost exclusively in USDT. Investigators said the activity raised concerns about cryptocurrency’s role in helping Iranian networks move money across borders despite international financial restrictions.

Blumenthal described Tether’s stablecoin as a significant component of Iran’s shadow banking system and called on the Treasury and Justice departments to investigate potential sanctions and banking-law violations.

“My new PSI report exposes how Tether and its flagship token have become central to Iran’s shadow banking system,” Blumenthal said in the Senate announcement accompanying the report.

The investigation also questioned Tether’s historical response to suspicious addresses. According to the findings, the company did not comprehensively and consistently freeze certain wallets linked to sanctioned entities before 2024, raising concerns about whether earlier intervention could have restricted some transactions.

Tether’s position differs sharply. By highlighting its claimed 94% reduction in Iran-linked USDT activity and its early-freezing practices, the company argues that its enforcement efforts should be considered when assessing its role in illicit financial networks.

Wallet freezes put stablecoin compliance under scrutiny

The disagreement highlights a distinctive feature of centrally issued stablecoins. Unlike cryptocurrencies whose networks operate without a single token issuer controlling the asset, Tether can blacklist blockchain addresses and restrict the movement of USDT held at targeted wallets.

That capability can assist authorities investigating suspected sanctions violations, money laundering and other financial crimes. It also places substantial responsibility on issuers to identify suspicious activity, assess intelligence and respond to credible enforcement requests.

Ardoino’s claim that Tether frequently acted before official designations raises an important question about how proactive compliance should be measured. Freezing a wallet before a government announcement may demonstrate early intervention, but the timing alone does not establish whether every relevant address was identified promptly or whether illicit transfers were prevented.

The Senate investigation, meanwhile, argues that delayed or inconsistent freezes allowed some Iran-Linked networks to continue operating. The competing accounts therefore concern not only how much USDT moved through the identified wallets, but also whether the issuer’s controls were sufficiently effective over time.

For cryptocurrency exchanges, investors and stablecoin users, the dispute underscores the growing importance of sanctions screening and issuer accountability. USDT’s widespread use in digital-asset markets makes its compliance practices particularly significant to regulators monitoring cross-border payments.

Iran-linked USDT dispute leaves questions unanswered

Neither the Senate findings nor Ardoino’s public response, on their own, resolves the central disagreement over Tether’s enforcement effectiveness. The report documents extensive USDT usage among the examined wallets, while the CEO points to earlier freezes and a sharp decline in associated transaction volumes.

Independent verification of the 94% figure would require further detail about the wallets included, the period measured, the baseline used and the method for attributing transactions to Iran-linked entities. Without those details, it is difficult to determine precisely how much of the decline resulted from Tether’s interventions rather than other enforcement actions or changes in transaction behaviour.

The stakes extend beyond one company. Stablecoin issuers are increasingly expected to demonstrate that their products cannot easily become channels for moving funds around financial restrictions. Their ability to freeze assets offers regulators an enforcement mechanism, but questions remain about the consistency and timing of its use.

For now, the Iran-Linked USDT controversy presents two competing assessments: Tether says proactive enforcement has substantially reduced activity, while Senate investigators argue that the token’s extensive use by Iran-Linked USDT networks warrants greater scrutiny.

Further disclosures and any subsequent findings from US authorities will be important in determining whether Tether’s controls adequately address the risks identified by lawmakers.