Iran Uses Tether Cryptocurrency to Evade Sanctions, Fund Proxies

Iran has been utilizing "Tether," a stablecoin cryptocurrency, to circumvent U.S. sanctions and finance proxy organizations like Hezbollah, according to a forthcoming report by U.S. Senate Democrats cited by The Wall Street Journal. The report from the Senate's Permanent Subcommittee on Investigations indicates that Tether's stablecoin, USDT, has become a primary payment method for the Iranian regime and a tool for funding its regional proxies.

Stablecoins, pegged to real-world currencies like the U.S. dollar, are less volatile than other digital assets, making them suitable for transactions and potentially for money laundering. Tether, which issues USDT, accounts for approximately 60% of the stablecoin market.

The Senate report, authored by Senator Richard Blumenthal, analyzed 846 crypto wallets sanctioned by the U.S. and Israel due to ties with Iran. It found that 84% of these wallets conducted transactions almost exclusively in USDT. This comes as the U.S. Treasury has intensified sanctions against Iran, particularly after the war began, announcing a campaign of economic isolation in August.

Blumenthal stated that the report "reveals how Tether and its flagship coin have become central to Iran's shadow banking system, enabling the Iranian government to fund its regional proxies, commit human rights abuses, and advance hostile drone and missile programs in defiance of our sanctions regime." The subcommittee has referred its findings to the Justice and Treasury Departments.

A Tether spokesperson did not respond to The Wall Street Journal's requests for comment. However, the newspaper noted that the company has previously cooperated with law enforcement to freeze wallets linked to the Iranian regime. While Tether has the technical capability to freeze and reissue USDT, the Senate report criticizes the company for not acting swiftly to freeze USDT in sanctioned wallets. Despite some indications that Iran may be reducing its reliance on Tether, the stablecoin remains a common element in recently sanctioned wallets linked to Iran's central bank and networks facilitating Iranian oil sales.