Written by: 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 known for having close ties with stablecoin issuer Tether's custody business, was revealed to have had Cantor Fitzgerald reach an agreement with Tether last year to invest in Tether and acquire about 5% of its shares.
There are doubts in the outside world that Lutnick will be able to avoid violating the ethical code of the transition team itself. These codes align with federal conflict of interest guidelines, requiring transition team members to recuse themselves from matters where their financial interests or those of organizations they are involved with may directly conflict.
According to recent reports, 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 a dual role.
Howard Lutnick was recently nominated as the U.S. Secretary of Commerce, and this appointment has attracted 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 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 firm 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 approach 'seriously overstepped.' He pointed out, 'They have veered far off the framework of processes and rules that are meant to ensure future leaders serve the public interest, not their personal interests.'
Critics argue that Lutnick's companies, including the financial services company Cantor and the 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 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 robustness, Lutnick has publicly defended stablecoin issuer Tether.
Additionally, Lutnick relies on lobbyist and fundraiser Jeff Miller for assistance. Miller has close ties to Trump's circle and congressional Republicans, helping 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 congressional members.
Cantor's 'deep cooperation' with Tether has sparked controversy.
Cantor reached an agreement with the world's largest stablecoin issuer Tether last year, investing in Tether and acquiring about 5% of its shares. According to the Wall Street Journal, Cantor has valued these shares at approximately $600 million. Tether currently holds billions of dollars in U.S. Treasury bonds through Cantor's custody services, and this custodial relationship reportedly brings in tens of millions of dollars in revenue for Cantor each year.
Additionally, 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 investors $2 billion in Bitcoin collateralized loans and plans to further expand the scale of the project.
After Lutnick's appointment, Cantor's role has increasingly become the focus. Lutnick has proudly claimed that Tether allows Cantor to fully review its financial condition. However, critics point out that this 'trust model' contradicts the crypto industry's advocated principle of 'don't trust, verify.'
A recent report by Politico indicated that some 'Trump insiders' are concerned about Lutnick conflating personal business interests with government responsibilities. The report stated that during Lutnick's meetings with lawmakers on Capitol Hill, he was supposed to focus on discussions about the transition government's work but instead involved himself in 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 financial regulatory heads. Richard Painter, an ethics lawyer from the George W. Bush administration, pointed out, 'Having someone from the crypto industry in charge of selecting financial regulators is asking for trouble.'
Competition among stablecoin issuers: USDC may gain more regulatory advantages.
On November 24, a spokesperson for Tether stated, 'The relationship between Tether and Cantor Fitzgerald is entirely professional and based on managing reserves. The claim that Howard Lutnick's joining the transition team somehow implies influence over regulatory actions is nonsense.'
On November 25, Howard Lutnick stated that after Senate approval, he would resign from Cantor, BGC, and Newmark, and he plans to transfer the company's Tether business relationship to a colleague, reportedly likely his son Brandon Lutnick.
Whether Tether can leverage Lutnick's long-standing relationship with Trump to block legislation and criminal charges that may favor USDC, 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 that of USDC ($34.3 billion), USDC may gain more advantages in the regulatory domain, such as being the first stablecoin to receive approval under the EU's Markets in Crypto-Assets (MiCA) this summer. Tether has criticized MiCA's provisions, such as the requirement that 60% of reserve assets be held in EU banks, arguing that these regulations increase risk.
In the U.S., Tether is reportedly under regulatory scrutiny for anti-money laundering issues. Compared to Circle, Tether has faced questions about its transparency. 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 the 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' (the period between the election and the new Congress's first meeting). These bills may provide advantages for 'payment-type stablecoins,' a term generally interpreted as more favorable to Circle's USDC than to 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 by name, another lawmaker openly criticized Cantor for providing Tether with access to the U.S. financial system.
Additionally, Circle's influence in U.S. politics is growing, and its main donor, Fairshake, along with other political action committees, has provided campaign funding to many pro-crypto lawmakers. If these lawmakers enter Congress, legislation related to USDC may be easier to pass, while Tether could 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 have also brought more uncertainties to the legislative, regulatory, and competitive landscape in this field.
