Tether's behind-the-scenes tycoon emerges.

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 previously unknown supporter of stablecoin issuer Tether, who had close dealings with it, was exposed for his company Cantor Fitzgerald having reached an agreement with Tether last year, investing in Tether and acquiring about 5% of its shares.

There are concerns that Lutnick will not be able to avoid violating the ethical guidelines of the transition team itself. These guidelines are consistent 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 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 his 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 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 completely stepped away from managing his financial enterprises 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 approach is 'seriously overstepping.'

He noted, 'They have strayed far from the framework of processes and rules that were established 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 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. Clients of Cantor and BGC may 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 soundness, Lutnick has publicly defended stablecoin issuer Tether.

Additionally, Lutnick relies on the help of lobbyist and fundraiser Jeff Miller. Miller is closely connected to Trump's circle and congressional Republicans and assists 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 lawmakers.

The 'deep cooperation' between Cantor and 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 values these shares at approximately $600 million. Tether currently holds billions of dollars in U.S. Treasury securities through Cantor's custody business, which reportedly earns Cantor tens of millions of dollars annually.

Furthermore, 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 scale of this project.

After Lutnick's appointment, Cantor's role has increasingly come into focus. Lutnick has proudly claimed that Tether allows Cantor to fully review its financial situation.

However, critics point out that this 'trust model' contradicts the 'don't trust, verify' philosophy promoted by the crypto industry.

A recent report by Politico indicated that some 'insiders from Trump' are concerned that Lutnick is conflating his personal business interests with his government duties.

Reports indicate that during discussions with lawmakers on Capitol Hill, Lutnick was supposed to focus on matters related to the transition government, but instead got involved in regulatory issues affecting his business interests, including his relationship with Tether.

Ethics experts have also expressed concerns about Lutnick's potential new role, suggesting that his background with Tether could influence the Trump administration's selection of leaders for financial regulatory agencies.

Richard Painter, an ethics lawyer from the George W. Bush administration, pointed out, 'Putting a crypto industry person in charge of selecting financial regulators is asking for trouble.'

Competition among stablecoin issuers: USDC may gain more advantages in the regulatory domain.

On November 24, a spokesperson for Tether stated, "Tether's relationship with Cantor Fitzgerald is purely professional and based on reserve management. Claims that Howard Lutnick joining the transition team somehow implies influence over regulatory actions are absurd."

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 relationship with Tether to a colleague, reportedly likely his son Brandon Lutnick.

Whether Tether can leverage Lutnick's long-term relationship with Trump to prevent legislation, criminal charges, or even protect its assets under Cantor's management that may favor USDC remains to be seen.

Although Tether's market value ($120.1 billion) far exceeds that of USDC ($34.3 billion), USDC may gain more advantages in the regulatory arena, such as becoming the first stablecoin to receive approval from the EU (Markets in Crypto-Assets Regulation) (MiCA) 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 U.S., Tether is reportedly under scrutiny from regulatory authorities for anti-money laundering issues. Compared to Circle, Tether is questioned on transparency.

Tether has yet to undergo an independent third-party audit of its billions of dollars in fiat reserves (mostly U.S. Treasury securities), while Circle has at least disclosed 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 could be brought to the agenda during the post-election 'lame duck session' (the period from the election until the new Congress convenes).

These bills may favor 'payment stablecoins,' a phrasing widely interpreted as more advantageous to Circle's USDC than to Tether's USDT.

A senior executive at Circle pointed out in a February congressional hearing that 'opaque stablecoin issuers' could be exploited by terrorists and illegal organizations.

Although 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, with major donors such as Fairshake and other political action committees providing campaign funds to many pro-cryptocurrency 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 generated have also introduced more variables into the legislative, regulatory, and competitive landscape of this field.

This article is a collaborative reprint from: PANews.

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