There are doubts about whether Lutnick will be able to avoid violating the transitional team's own code of ethics.

Written by: Weilin, PANews

Howard Lutnick, chairman and CEO of Wall Street financial services firm Cantor Fitzgerald, was appointed by Trump as the next U.S. Secretary of Commerce on November 20 and is currently awaiting Senate approval. However, this previously little-known supporter of stablecoin issuer Tether, who has close ties to its custodial business, 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 will be able to avoid violating the transitional team's own code of ethics. These codes are consistent with the U.S. federal conflict of interest guidelines, which require members of the transition team to recuse themselves from matters where their financial interests or the interests of organizations related to their business may directly conflict.

According to recent news, 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 has taken on a dual role

Howard Lutnick was recently nominated as the next U.S. Secretary of Commerce, a nomination that has generated widespread attention and controversy. He is not only the chairman and CEO of Wall Street financial giant Cantor Fitzgerald but also the co-chair of Trump's transition team. Lutnick's task is to select 4,000 appointees for Trump's government, including antitrust officials, securities lawyers, and national security advisers with global experience. However, he has not completely withdrawn from managing his financial enterprises while serving on the transition team.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 actions "seriously overstepped." He pointed out, "They have strayed far from the entire process and the framework of rules, which are set to ensure that future leaders serve the public interest, not their own private interests."

Critics argue that Lutnick's companies, including financial services firm Cantor and brokerage firm BGC Group, are involved in nearly every sector of the American economy, from healthcare to technology. The publicly listed Newmark Group, where Lutnick serves as 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 the FDA's decisions on new drug approvals. In the face of questions about financial soundness, Lutnick has publicly defended the stablecoin issuer Tether.

Furthermore, Lutnick relies on the help of lobbyist and fundraiser Jeff Miller. Miller has close ties to 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 Miller's lobbying firm $300,000. Miller has also helped Lutnick establish connections with congressional lawmakers.

Cantor's "deep cooperation" with Tether has sparked controversy

Cantor reached an agreement with the world's largest stablecoin issuer Tether last year 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 generates tens of millions of dollars in annual revenue for Cantor.

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.

Following Lutnick's appointment, Cantor's role has increasingly come under scrutiny. Lutnick has proudly claimed that Tether allows Cantor to conduct a full review of its financial status. However, critics point out that this "trust model" contradicts the principle of "don't trust, verify" advocated by the crypto industry.

A recent report by Politico indicated that some "Trump insiders" are worried about Lutnick conflating personal business interests with government duties. The report stated that during his meetings with lawmakers on Capitol Hill, Lutnick should have focused on discussions about the transitional government work but instead addressed regulatory issues affecting his business interests, including his relationship with Tether.

Ethics experts have also expressed concerns about Lutnick's potential new role, believing that his background with Tether could 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 someone from the crypto industry responsible for selecting financial regulators is asking for trouble."

Competition among stablecoin issuers: USDC or gaining more advantages in regulation

On November 24, a spokesperson for Tether stated: "The relationship between Tether and Cantor Fitzgerald is entirely professional and based on managing reserves. Claims that Howard Lutnick's joining the transition team implies some influence over regulatory actions are nonsense."

On November 25, Howard Lutnick stated that he would resign from his positions at Cantor, BGC, and Newmark pending Senate approval, with plans to transfer the company's relationship with Tether to a colleague, with his son Brandon Lutnick likely to be the candidate.

Whether Tether can leverage Lutnick's long-standing relationship with Trump to prevent legislation or criminal charges that may favor USDC, and 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 advantages in regulation, such as becoming the first stablecoin approved by the EU (Markets in Crypto-Assets Regulation) (MiCA) this summer. In contrast, Tether has criticized MiCA provisions (such as requiring 60% of reserve assets to be held in EU banks), arguing that these regulations increase risks.

In the U.S., Tether is reportedly under scrutiny by regulators for anti-money laundering issues. Compared to Circle, Tether's transparency has been questioned. Tether has yet to conduct an independent third-party audit of its billions of dollars in fiat reserves (primarily U.S. Treasury bonds), while Circle has at least disclosed detailed CUSIP numbers for its reserve assets, seen as a step toward transparency.

Currently, several stablecoin-related bills are being formulated in the U.S. Congress, which may be brought to the agenda during the post-election "lame duck session" (the period between the election and the new Congress convening). These bills may provide advantages to "payment stablecoins," a term widely interpreted as being more favorable to Circle's USDC rather than Tether's USDT.

An executive from Circle pointed out during a congressional hearing in February that "opaque stablecoin issuers" could be exploited by terrorists and illegal organizations. Although she did not directly mention the names Tether and Cantor, another lawmaker bluntly criticized Cantor for providing a channel for Tether to enter the U.S. financial system.

Additionally, Circle's influence in U.S. politics is growing, with major donors like Fairshake and other political action committees providing campaign funding for many pro-crypto lawmakers. If these lawmakers enter Congress, legislation related to USDC may pass more easily, while Tether may face more scrutiny.

Looking ahead, Lutnick has put the relationship between Cantor and Tether under the spotlight of the public and lawmakers, which may have complex implications for his future role in the government. Tether's dominance in the stablecoin market and the controversies it has sparked have also introduced more variables into the legislative, regulatory, and competitive landscape in this field.