Author: Weilin, PANews
Howard Lutnick, chairman and CEO of Wall Street financial services firm Cantor Fitzgerald, was appointed by Trump on November 20 as the next U.S. Secretary of Commerce and is currently awaiting Senate approval. However, this previously little-known supporter of cryptocurrency issuers Tether, who has had close dealings with the company, has been exposed for Cantor Fitzgerald's agreement with Tether last year to invest in Tether and acquire about 5% of its shares.
There are doubts about whether Lutnick can avoid violating the transition team's own code of ethics. These guidelines align with the U.S. federal conflict of interest guidelines, requiring transition team members to recuse themselves from matters where their financial interests or those of organizations related to their business may conflict directly.
According to recent reports, Howard Lutnick stated that once the Senate confirms his appointment as Secretary of Commerce, he will resign from Cantor and plans to divest his interests in the company to comply with government ethics regulations.
Wall Street billionaire Howard Lutnick takes on a dual role
Howard Lutnick was recently nominated as the U.S. Secretary of Commerce, a move that has sparked widespread attention and controversy. He is not only the chairman and CEO of Wall Street financial giant Cantor Fitzgerald, but also a co-chair of the Trump transition team. Lutnick's task is to select 4,000 new appointees for Trump's administration, including antitrust officials, securities lawyers, and national security advisors with global experience. However, he has not fully stepped back from managing his financial enterprise while serving on the transition team.
This dual role has raised concerns about conflicts of interest. Max Stier, president of the nonprofit government management organization Partnership for Public Service, stated that the Trump team's approach 'seriously oversteps'. He pointed out, 'They have strayed far from the framework of processes and rules designed to ensure that future leaders serve the public interest, not their private interests.'
Critics argue that Lutnick's companies, including financial services firm Cantor and brokerage group BGC, are involved in nearly every sector of the U.S. economy, from healthcare to technology. The publicly traded company Newmark Group, of which Lutnick is chairman, provides consulting services for commercial real estate globally. Clients of Cantor and BGC may be affected by broad government policies and regulations, such as Trump's desire to maintain low corporate tax rates and decisions by the FDA regarding new drug approvals. In the face of questions about financial stability, Lutnick has publicly defended stablecoin issuer Tether.
Furthermore, Lutnick also relies on lobbyist and fundraiser Jeff Miller's help. Miller has close ties with Trump's circle and congressional Republicans, assisting Tether with its affairs in Washington. Since the end of last year, a subsidiary of Lutnick's holding company Cantor Fitzgerald has paid $300,000 to Miller's lobbying firm. Miller has also helped Lutnick connect with congressional members.
Cantor's 'deep cooperation' with Tether sparks controversy
Last year, Cantor reached an agreement with Tether, the world's largest stablecoin issuer, to invest in Tether and acquire about 5% of its shares. According to the Wall Street Journal, Cantor values these shares at approximately $600 million. Tether currently holds billions of dollars in U.S. Treasury bonds through Cantor's custodial business, which reportedly brings in tens of millions of dollars in revenue for Cantor each year.
Moreover, according to Bloomberg, Cantor is negotiating with Tether for funding to support its newly announced Bitcoin financing business. Under this plan, Cantor will initially offer $2 billion in Bitcoin-backed loans to investors and plans to further expand the project's scale.
Following Lutnick's appointment, Cantor's role has increasingly come into focus. Lutnick has proudly claimed that Tether allows Cantor to fully review its financial status. However, critics point out that this 'trust model' contradicts the cryptocurrency industry's advocacy of 'don't trust, verify'.
A recent report by Politico noted that some 'insiders from Trump' are concerned about Lutnick conflating his personal business interests with his government duties. The report stated that during Lutnick's meetings with lawmakers on Capitol Hill, he was supposed to focus on discussions about the transition government's work but ended up discussing regulatory issues that affect his business interests, including his relationship with Tether.
Ethics experts have also expressed concerns about Lutnick's potential new role, arguing that his Tether background may influence the Trump administration's selection of heads for financial regulatory agencies. Richard Painter, an ethics lawyer from the George W. Bush administration, pointed out, 'Having a cryptocurrency industry person in charge of selecting financial regulators is asking for trouble.'
Competition among stablecoin issuers: USDC may gain more advantages in regulation
On November 24, a spokesperson for Tether stated, 'The relationship between Tether and Cantor Fitzgerald is purely professional and based on reserve management. The claim that Howard Lutnick joining the transition team somehow implies influence over regulatory actions is nonsense.'
On November 25, Howard Lutnick announced he would resign from Cantor, BGC, and Newmark following Senate approval. Lutnick currently serves as CEO of Cantor, and he plans to hand over the company's Tether business relationship to a colleague, with reports suggesting that the candidate is likely to be his son, Brandon Lutnick.
Whether Tether can leverage Lutnick's long-standing relationship with Trump to thwart potential legislation favoring USDC, criminal charges, or even protect its assets under Cantor's management remains to be seen.
Although Tether's market capitalization ($120.1 billion) far exceeds that of USDC ($34.3 billion), USDC may gain more regulatory advantages, such as becoming the first stablecoin to receive approval from the EU (Crypto Assets Market Regulation, MiCA) this summer. Tether has criticized MiCA's regulations, such as the requirement that 60% of reserve assets be held in EU banks, arguing that these regulations increase risk.
In the U.S., Tether is reportedly under scrutiny by regulators for anti-money laundering issues. Compared to Circle, Tether's transparency is questioned. Tether has yet to undergo an independent third-party audit of its multi-billion dollar fiat reserves (primarily U.S. Treasury bonds), while Circle has at least disclosed detailed CUSIP numbers of its reserve assets, considered a step towards transparency.
Currently, several stablecoin-related bills are brewing in the U.S. Congress, which could be brought to the agenda during the post-election 'lame duck session' (the period after the election and before the new Congress convenes). These bills may provide advantages for 'payment-type stablecoins,' a term widely interpreted as more favorable to Circle's USDC rather than Tether's USDT.
A Circle executive noted during a congressional hearing in February that 'opaque stablecoin issuers' could be exploited by terrorists and illegal organizations. Although she did not directly mention Tether and Cantor by name, another lawmaker openly criticized Cantor for providing Tether with access to the U.S. financial system.
Additionally, Circle's influence in American politics is growing, with major donors like Fairshake and other political action committees providing campaign funding to many pro-cryptocurrency legislators. If these legislators enter Congress, legislation related to USDC may be easier to pass, while Tether could face more scrutiny.
Looking ahead, Lutnick has placed the relationship between Cantor and Tether under public and legislative scrutiny, which may have complex implications for his future role in government. Tether's dominance in the stablecoin market and the controversies it has sparked have added more variables to the legislative, regulatory, and competitive landscape of this field.
