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 crypto supporter, previously unknown to the public, has been exposed for having a close relationship with Tether's custody business, with Cantor Fitzgerald reaching 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 transition team's own code of ethics. These guidelines are consistent with the U.S. federal conflict of interest guidelines, requiring transition team members to recuse themselves from matters involving their financial interests or the interests of organizations related to their business that may directly conflict.
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 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 a co-chair of Trump's 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 actions 'seriously overstep.' He pointed out, 'They have strayed far from the framework of processes and rules that were established to ensure that future leaders serve the public interest rather than their private interests.'
Critics argue that Lutnick's companies, including financial services firm Cantor and brokerage firm BGC Group, are involved in almost every sector of the U.S. economy, from healthcare to technology. The publicly traded Newmark Group, of which Lutnick is chairman, provides consulting services for commercial real estate globally. Cantor and BGC's clients may be affected by widespread government policies and regulations, such as Trump's desire to maintain a low corporate tax rate and the FDA's decisions on new drug approvals. In the face of questions about financial stability, 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 $300,000 to Miller's lobbying firm. Miller has also helped Lutnick connect with congressional members.
Cantor's 'deep cooperation' with Tether has sparked controversy.
Last year, Cantor reached an agreement with Tether, the world's largest stablecoin issuer, investing in Tether and acquiring 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 brings in tens of millions of dollars in revenue for Cantor each year.
Additionally, according to Bloomberg, Cantor is negotiating with Tether to seek funding to support its recently announced Bitcoin financing business. Under this plan, Cantor plans to initially offer $2 billion in Bitcoin collateralized loans to investors and intends to further expand the project's scale.
After Lutnick's appointment, Cantor's role has increasingly come under scrutiny. Lutnick has previously proudly stated that Tether allows Cantor to fully review its financial situation. However, critics point out that this 'trust model' contradicts the 'don't trust, verify' principle advocated by the crypto industry.
A recent report from Politico indicated that some 'Trump insiders' are concerned that Lutnick is conflating personal business interests with government responsibilities. The report stated that while Lutnick was supposed to focus on discussions about the transition government's work during meetings with lawmakers on Capitol Hill, he brought up 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 may affect the Trump administration's selection of heads of financial regulatory agencies. Richard Painter, an ethics lawyer from former President George W. Bush's administration, pointed out, 'Putting a crypto industry person in charge of selecting financial regulators is just asking for 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, based on reserve management. Claims that Howard Lutnick's involvement in the transition team somehow implies influence over regulatory actions are nonsense.'
On November 25, Howard Lutnick stated that after Senate approval, he would resign from Cantor, BGC, and Newmark. Lutnick currently serves as CEO of Cantor and plans to transfer the company's relationship with Tether to a colleague, 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 even preserve 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 under the EU's Markets in Crypto-Assets (MiCA) regulation this summer. Tether has criticized MiCA regulations (such as requiring 60% of reserve assets to be held in EU banks), claiming that these regulations increase risks.
In the United States, Tether is reportedly under scrutiny from regulators due to anti-money laundering issues. Compared to Circle, Tether has faced questions regarding its transparency. Tether has not yet undergone an independent third-party audit of its billions of dollars in fiat reserves (primarily U.S. Treasury bonds), while Circle has at least published detailed CUSIP numbers of its reserve assets, seen as a step towards transparency.
Currently, several bills related to stablecoins are brewing in the U.S. Congress and may be brought to the agenda during the post-election 'lame-duck session' (the period between the election and the convening of the new Congress). These bills may provide advantages for 'payment stablecoins,' a term 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. Although she did not directly mention the names Tether and Cantor, another congressman openly criticized Cantor for providing a channel for Tether to enter the U.S. financial system.
Moreover, Circle's influence in American politics is growing, with its main donor, Fairshake, and other political action committees providing campaign funds to many pro-cryptocurrency legislators. If these legislators enter Congress, legislation related to USDC may pass more easily, while Tether may face more scrutiny.
Looking ahead, Lutnick has placed 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 raised have also brought more variables to the legislative, regulatory, and competitive landscape in this field.
