Tether freezes $131 million after Treasury targets Iran-linked wallets

Tether froze more than $131 million in USDT after the U.S. Treasury’s sanctions office targeted crypto wallets tied to Iran’s central bank and the Islamic Revolutionary Guard Corps, according to the Treasury and Treasury Secretary Scott Bessent. For everyday crypto investors, the case is a reminder that major stablecoins can be stopped at the issuer level, even when they sit on public blockchains rather than in bank accounts.

The Treasury’s Office of Foreign Assets Control, known as OFAC, sanctioned multiple wallet addresses on Tuesday. OFAC is the Treasury unit that enforces U.S. sanctions by blocking access to assets linked to designated people, companies or governments.

The freeze covered four addresses on Tron, a blockchain often used for low-cost transfers of USDT. USDT is Tether’s dollar-pegged stablecoin, meaning it is designed to trade near $1 and is commonly used as a digital substitute for cash in crypto markets.

Bessent said in a post on X that the Treasury was focused on disrupting Iran’s illicit financial activity, including its use of digital assets. He said the U.S. would “aggressively follow the money and deny the Iranian regime access” to illicit funds.

How a stablecoin freeze works

Crypto wallets are usually controlled by private keys, but some tokens also include issuer-controlled tools. Because Tether issues USDT, it can block specific addresses from moving the token when those addresses are sanctioned or otherwise restricted.

That does not require the same process as freezing a traditional bank account. The tokens remain visible on the blockchain, but the targeted addresses cannot transfer them once Tether blocks them at the smart-contract level. A smart contract is software that runs token rules on a blockchain.

The mechanism is especially relevant for investors who treat stablecoins as cash-like. USDT trades across networks including Ethereum and Tron, outside the traditional banking system that Iran has largely been cut off from for years, but issuer controls still create a compliance choke point.

Analysts traced funds to crypto services

On-chain analyst Specter said on X that he identified the four frozen addresses before Bessent’s announcement and connected them to Iran’s central bank and the IRGC. On-chain analysis refers to tracking transactions recorded on public blockchains.

According to Specter’s analysis, most of the frozen funds had earlier been withdrawn from DTC Pay, a payment service provider, and Bitso, a Latin American crypto exchange, before moving into the wallets later sanctioned by OFAC.

The Treasury also announced separate sanctions against seven people and entities that it said were involved in a global weapons procurement network for Iran’s armed forces and the IRGC. The Treasury identified the network as including a Tehran-based supplier of drone parts, a Nigerian intermediary and Russian nationals connected to a Moscow aviation company.

The action adds to Washington’s broader effort to cut off sanctioned actors from dollar-linked financial rails, including crypto rails. It also shows the split personality of stablecoins: they can move quickly across borders on public networks, while major issuers can still enforce address-level restrictions when sanctions authorities step in.

This story draws on original reporting from Decrypt.