US Senate Report Identifies USDT as a Liquidity Channel for Iran's Shadow Banking

The U.S. Senate Permanent Subcommittee on Investigations (PSI) report indicates that stablecoins, particularly USDT, are recognized as a key liquidity channel supporting Iran's shadow banking system. Licensed virtual asset service providers (VASPs) in the Gulf Cooperation Council (GCC) region face heightened sanctions compliance pressures, necessitating enhanced wallet ownership identification and counterparty assessments. Soham Jethani, a partner at the law firm Septten, stated that merchants settling crypto assets into local fiat currencies do not necessarily evade sanction risks, as liabilities may involve designated entities, provision of funds or economic resources, and asset handling within the transaction chain. Jethani pointed out that the name of the stablecoin or the currency in which it is valued does not determine legal ownership; specific rights depend on contractual arrangements and actual payment processes. Globally circulating stablecoins may pose secondary sanction risks, and indirect or historical wallet associations do not automatically constitute violations, requiring consideration of applicable regulations, transaction participants, and specific facts. In regulated markets like the UAE, licensed exchange wallets are continuously monitored, and related funds may be frozen before consumption settlements, with merchants also required to complete KYC. Regulated VASPs must assume responsibilities for counterparty, sanction risk assessments, and corresponding controls.

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