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 confirmation. However, this crypto supporter, previously known for close ties with stablecoin issuer Tether, has been revealed that his company Cantor Fitzgerald reached an agreement with Tether last year to invest in Tether and acquire about 5% of its shares.
There are doubts that Lutnick will be able to avoid violating the ethical guidelines of the transition team itself. These guidelines align with U.S. federal conflict of interest rules, requiring members of the transition team to avoid matters in which their own 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 U.S. Secretary of Commerce, a nomination 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 Trump's transition team. Lutnick's task is to select 4,000 new appointees for Trump's government, 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 raises concerns about conflicts of interest. Max Stier, president of the non-profit government management organization Partnership for Public Service, stated that the Trump team's actions 'seriously overstep.' He pointed out: 'They have strayed far from the framework of processes and rules established to ensure that future leaders serve the public interest, not their private interests.'
Critics believe that Lutnick's companies, including financial services firm Cantor and brokerage firm 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. Cantor and BGC's clients may be affected by a wide range of government policies and regulations, such as Trump's desire to maintain low corporate tax rates and decisions by the Food and Drug Administration (FDA) regarding new drug approvals. In the face of questions about financial stability, Lutnick has publicly defended the stablecoin issuer Tether.
Additionally, Lutnick 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 members of Congress.
The 'deep cooperation' between Cantor and Tether has sparked controversy.
Last year, Cantor reached an agreement with the world's largest stablecoin issuer Tether to invest in Tether and acquire about 5% of its shares. According to the Wall Street Journal, Cantor values these shares at about $600 million. Tether currently holds billions of dollars in U.S. Treasury bonds through Cantor's custody services, which reportedly bring Cantor tens of millions of dollars in revenue each year.
Additionally, according to Bloomberg, Cantor is negotiating with Tether for funding to support its recently 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.
After Lutnick's appointment, Cantor's role has increasingly come under scrutiny. Lutnick has previously claimed that Tether allows Cantor to conduct a full review of its financial condition. However, critics point out that this 'trust model' contradicts the 'don't trust, verify' principle advocated by the crypto industry.
A recent report by Politico noted that some 'Trump insiders' are concerned that Lutnick is conflating personal business interests with government responsibilities. The report stated that during meetings with lawmakers on Capitol Hill, Lutnick, who should have focused on discussions about the transition government's work, instead raised regulatory issues affecting his business interests, including his relationship with Tether.
Ethics experts have also expressed concerns about Lutnick's potential new role, arguing that his background with Tether could influence Trump's selection of financial regulatory leaders. Richard Painter, an ethics lawyer for former President George W. Bush's administration, pointed out: 'Putting someone from the crypto industry in charge of selecting financial regulators is inviting trouble.'
Competition among stablecoin issuers: USDC may gain more advantages in the regulatory field.
On November 24, a spokesperson for Tether stated: 'The relationship between Tether and Cantor Fitzgerald is entirely professional and based on reserve management. Claims that Howard Lutnick's joining the transition team somehow implies influence over regulatory actions are nonsense.'
On November 25, Howard Lutnick stated that after Senate approval, he will resign from positions at Cantor, BGC, and Newmark. Howard Lutnick currently serves as CEO of Cantor, and he plans to hand over the company's Tether business relationship to a colleague, with the candidate likely being his son Brandon Lutnick.
Whether Tether can leverage Lutnick's long-standing relationship with Trump to prevent legislation that might favor 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 advantages in the regulatory field, such as becoming the first stablecoin approved by the EU (the Markets in Crypto-Assets regulation) (MiCA) this past summer. Tether has criticized MiCA regulations (such as requiring 60% of reserve assets to 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 has faced questions about transparency. Tether has yet to conduct an independent third-party audit of its billions of dollars in fiat reserves (mainly U.S. Treasury bonds), while Circle has at least published detailed CUSIP numbers for its reserve assets, which is seen as a step towards transparency.
Currently, several bills related to stablecoins are brewing 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 could provide advantages for 'payment stablecoins,' a wording that is widely interpreted as 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. While she did not directly mention Tether and Cantor, another lawmaker bluntly criticized Cantor for providing Tether 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 funds to 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 places the relationship between Cantor and Tether under the spotlight of the public and lawmakers, which may have complex implications for his future role in government. Tether's dominance in the stablecoin market and the controversies it has sparked also bring more variables to the legislative, regulatory, and competitive landscape in this area.
