Written by: Weilin, PANews
Howard Lutnick, chairman and CEO of Wall Street financial services company 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 unknown supporter of cryptocurrency has been exposed for his company's close dealings with stablecoin issuer Tether, which reached an agreement 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 ethical guidelines. These guidelines align with U.S. federal conflict of interest guidelines, requiring transition team members to avoid matters where their personal financial interests or those of related organizations may directly conflict.
According to recent reports, Howard Lutnick has stated that he will resign from Cantor once the Senate confirms his appointment as Secretary of Commerce 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 has recently been nominated as the 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 the 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 completely stepped back from managing his financial company during the transition team.
This dual role has raised 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 approach "seriously oversteps boundaries." He noted, "They have strayed far from the entire framework and rules established to ensure future leaders serve the public interest, not their own private interests."
Critics argue that Lutnick's companies, including financial services firm Cantor and brokerage BGC Group, are involved in nearly every sector of the U.S. economy, from healthcare to technology. The publicly traded company 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 governmental 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 regarding financial soundness, Lutnick has publicly defended stablecoin issuer Tether.
Additionally, Lutnick relies on the help of lobbyist and fundraiser Jeff Miller, who 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 connect with congressional members.
Cantor's "deep collaboration" with Tether has sparked controversy.
Cantor reached an agreement with Tether, the world's largest stablecoin issuer, 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 custody business, which reportedly generates tens of millions of dollars in revenue for Cantor annually.
Additionally, according to Bloomberg, Cantor is negotiating with Tether to seek funding for its newly announced Bitcoin financing business. Under this plan, Cantor will initially offer investors $2 billion in Bitcoin-backed loans and plans to further expand the project's scale.
After being appointed by Lutnick, Cantor's role increasingly became the focus. Lutnick had proudly claimed that Tether allowed Cantor to fully review its financial status. However, critics pointed out that this "trust model" contradicts the cryptocurrency industry's advocated principle of "don't trust, verify."
A recent report from Politico noted that some "Trump insiders" are concerned about Lutnick mixing personal business interests with government responsibilities. The report stated that during his meetings with lawmakers on Capitol Hill, Lutnick should have focused on discussions of the transition government's work but instead involved 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 could influence the Trump administration's selection of heads for financial regulatory agencies. Richard Painter, an ethics lawyer from former President George W. Bush's administration, stated, "Having someone from the cryptocurrency industry 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 entirely professional and based on managing reserves. Claims that Howard Lutnick joining the transition team somehow implies influence over regulatory actions are unfounded."
On November 25, Howard Lutnick stated that he would resign from Cantor, BGC, and Newmark after Senate approval, and he plans to transfer the company's Tether business relationship 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 legislation and criminal charges that may favor USDC, and whether it can 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 approved under the EU's (Markets in Crypto-Assets regulation) (MiCA) this summer. Tether has criticized MiCA's 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 multi-billion dollar fiat reserves (mainly U.S. Treasury bonds), while Circle has at least disclosed detailed CUSIP numbers of 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" (referring to the period after the election and before the new Congress convenes). These bills may advantage "payment stablecoins," a term widely interpreted as more favorable to Circle's USDC rather than Tether's USDT.
A Circle executive 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 by name, another lawmaker openly 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 funding to many pro-cryptocurrency legislators. If these legislators enter Congress, legislation related to USDC may be easier to pass, while Tether could face increased 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 the government. Tether's dominance in the stablecoin market and the controversies it has sparked have also brought more uncertainties to the legislative, regulatory, and competitive landscape in this field.
