A report from the U.S. Senate Permanent Subcommittee on Investigations identified stablecoins, particularly Tether’s USDT, as a key liquidity channel supporting Iran’s shadow banking system. The finding raises sanctions compliance pressure for licensed virtual asset service providers, or VASPs, operating across the Gulf Cooperation Council region. According to the report’s framing, firms in those markets need tighter wallet attribution checks and stronger counterparty reviews.
Soham Jethani, a partner at law firm Septten, said merchants do not avoid sanctions risk simply by converting crypto proceeds into local fiat currency. He said liability can arise from providing funds or economic resources to designated parties, or from handling assets within a transaction chain, and that exposure may emerge before a bank completes final settlement. Jethani also said the name of a stablecoin or its denomination currency does not determine legal ownership, which instead depends on contractual arrangements and the actual payment flow.
He added that globally circulating stablecoins can also create secondary sanctions risk. At the same time, indirect or historical wallet links do not automatically amount to a violation and must be assessed against the applicable regime, the parties involved, and the specific facts. In regulated markets such as the United Arab Emirates, licensed exchange wallets remain under ongoing monitoring, funds can be frozen before consumer settlement, and merchants must complete KYC.
A report from the U.S. Senate Permanent Subcommittee on Investigations, or PSI, identified stablecoins, especially USDT, as a key liquidity channel supporting Iran’s shadow banking system.
That finding puts licensed virtual asset service providers, or VASPs, in the Gulf Cooperation Council, or GCC, under heavier sanctions compliance pressure. The report points to a need for stronger wallet attribution work and closer counterparty assessment.
Soham Jethani, a partner at law firm Septten, said merchants do not sidestep sanctions risk simply by settling crypto assets into local fiat currency. He said liability may involve providing funds or economic resources to designated parties, as well as handling assets within a transaction chain, and that such exposure can arise before a bank completes final settlement.
Jethani also said a stablecoin’s name or denomination currency does not determine legal ownership. The relevant rights depend on contractual arrangements and the actual payment process.
He added that globally circulating stablecoins may also create secondary sanctions risk. At the same time, an indirect or historical wallet connection does not by itself amount to a violation; the assessment depends on the applicable regime, the parties involved, and the specific facts.
In regulated markets such as the United Arab Emirates, wallets at licensed exchanges remain under ongoing monitoring, and related funds can be frozen before consumer settlement. Merchants are also required to complete KYC. Regulated VASPs handling fiat on-ramps and off-ramps bear responsibility for counterparty checks, sanctions risk assessment, and related controls.
The report was cited by Bitcoin.com News.
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