Article reprinted from: Weilin
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 confirmation. However, this previously lesser-known crypto supporter with close ties to the stablecoin issuer Tether has been revealed to have had his company Cantor Fitzgerald enter into an agreement with Tether last year, investing in Tether and acquiring about 5% ownership.
There are doubts that Lutnick will be able to avoid violating the transition team's own code of ethics. These codes align with U.S. federal conflict of interest guidelines, requiring transition team members to recuse themselves from matters that may directly conflict with their financial interests or the interests of organizations related to their business.
According to the latest 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 rules.
Wall Street billionaire Howard Lutnick has taken on a dual role
Howard Lutnick's recent nomination as U.S. Secretary of Commerce has drawn 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 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 nonprofit 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 architecture of the entire process and rules, which are 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 firm BGC Group, 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 could be significantly impacted 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 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 establish connections with members of Congress.
The 'deep cooperation' between Cantor and Tether has sparked controversy
Cantor reached an agreement last year with Tether, the world's largest stablecoin issuer, investing in Tether and acquiring about 5% ownership. According to the Wall Street Journal, Cantor valued these shares at approximately $600 million. Tether currently holds billions of dollars in U.S. Treasury bonds through Cantor's custodial services, which reportedly generates tens of millions of dollars in annual revenue for Cantor.
Additionally, according to Bloomberg, Cantor is negotiating with Tether to seek funding to support its newly announced bitcoin financing business. Under this plan, Cantor will initially offer investors $2 billion in bitcoin-secured loans and plans to further expand the project.
After Lutnick's nomination, Cantor's role has increasingly come under scrutiny. Lutnick had proudly claimed that Tether allowed Cantor to fully review its financial condition. However, critics argue that this 'trust model' contradicts the crypto industry's advocated principle of 'don't trust, verify'.
A recent report by Politico noted that some 'Trump insiders' are concerned that Lutnick is conflating his personal business interests with government responsibilities. The report states that during his meetings with lawmakers on Capitol Hill, Lutnick, instead of focusing on discussions about the transition government work, addressed regulatory issues affecting his business interests, including his relationship with Tether.
Ethics experts have also expressed concerns about Lutnick's potential new role, fearing that his Tether background could influence the Trump administration's selection of financial regulatory officials. Richard Painter, an ethics lawyer from the former 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 may gain more advantages in the regulatory arena
On November 24, a spokesperson for Tether stated, 'The relationship between Tether and Cantor Fitzgerald is entirely professional and management reserve-based. Claims that Howard Lutnick's joining the transition team somehow implies influence over regulatory actions are absurd.'
On November 25, Howard Lutnick announced that he would resign from his positions at Cantor, BGC, and Newmark after Senate approval. Howard Lutnick currently serves as the CEO of Cantor and plans to transfer the company's relationship with Tether to a colleague, who is reportedly likely to be his son, Brandon Lutnick.
Whether Tether can leverage Lutnick's long-standing relationship with Trump to prevent potentially USDC-favoring legislation, criminal charges, or even protect its assets under Cantor's management remains to be seen.
Although Tether's market capitalization ($120.1 billion) is far higher than USDC's ($34.3 billion), USDC may gain more advantages in the regulatory arena, such as becoming the first stablecoin to receive approval under the EU's (Market in Crypto-Assets Regulation) (MiCA) this summer. Tether has criticized MiCA provisions (such as requiring 60% of reserve assets to be held in EU banks), arguing that these requirements increase risks.
In the United States, Tether is reportedly under scrutiny by regulators due to anti-money laundering issues. Compared to Circle, Tether is questioned on transparency. Tether has not yet undergone an independent third-party audit regarding its billions of dollars in fiat reserves (mainly U.S. Treasury bonds), while Circle has at least disclosed detailed CUSIP numbers for its reserve assets, which is seen as a step toward 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 after the election and before the new Congress convenes). These bills may favor 'payment stablecoins', a term generally 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. Although she did not directly mention Tether and Cantor, another legislator openly criticized Cantor for providing Tether access to the U.S. financial system.
Moreover, Circle's influence in American politics is increasing, with its main donor Fairshake and other political action committees providing campaign funding to many pro-crypto lawmakers. If these lawmakers enter Congress, legislation related to USDC may pass more easily, while Tether may face increased scrutiny.
Looking ahead, Lutnick will place the relationship between Cantor and Tether in 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 also bring more uncertainties to the legislative, regulatory, and competitive landscape in this field.
