Tether said it helped authorities freeze nearly $550m of Iran-linked USDT during 2026, as Democratic investigators on the Senate Permanent Subcommittee on Investigations published a report accusing the token of being used to circumvent sanctions. The company said it has worked with international law enforcement for years and, in 2026, froze more than $130m across four wallets; separately, in April it froze more than $344m tied to the Central Bank of Iran.
The Senate report said 84% of 846 crypto wallets sanctioned for links to Iran had transacted exclusively or almost exclusively in USDT. Following the report, Senator Richard Blumenthal urged the Treasury and Justice departments to examine possible sanctions breaches. Tether said its cooperation had led to more than $4.9bn in assets being frozen worldwide, including more than $2.4bn connected to US authorities, and listed the DOJ, FBI, US Secret Service, HSI and OFAC among agencies it has worked with.
Regulatory Risks and Volatility in Derivatives Markets
We advise derivative traders to brace for heightened volatility in crypto options and futures as regulatory pressure mounts on Tether. With US senators pushing for a formal federal investigation, we could see a sudden widening of the price spread between USDT-collateralized and USDC-collateralized contracts. Historically, major regulatory actions against stablecoin issuers—such as the SEC action against BUSD in early 2023—have triggered swift liquidations and double-digit drops in open interest across major exchanges.
Risk Management and Trading Strategies
We suggest closely monitoring the USDT peg on key liquidity venues like Curve’s 3pool, where imbalances often signal early signs of capital flight. During previous market panics, such as the mid-2022 crypto downturn, Tether briefly slipped to $0.95, which wiped out over $1 billion in leveraged derivatives positions within days. Hedging risk now by shifting margin collateral to USD-denominated alternatives or buying near-dated put options on Bitcoin is a prudent defensive move.
We also expect funding rates for USDT-denominated perpetual swaps to become highly volatile, opening up short-term arbitrage plays for agile traders. If panic drives the price of USDT down, futures contracts tied to it may trade at a steep discount compared to spot prices, mimicking the 2% to 3% pricing discrepancies seen during past stablecoin de-pegging events. Capitalizing on these temporary dislocations while keeping overall leverage low will help protect portfolios in the weeks ahead.
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