Author: Weilin, PANews
Howard Lutnick, the 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 known crypto supporter, who had close ties with the stablecoin issuer Tether, has been exposed that his company Cantor Fitzgerald reached an agreement with Tether last year, investing in Tether and acquiring about 5% of its shares.
The outside world suspects that Lutnick will be unable to avoid violating the moral code of the transition team itself. These codes are consistent with the U.S. federal conflict of interest guidelines, which require transition team members to recuse themselves from matters involving their own financial interests or the interests of organizations directly related to their business.
According to the latest news, Howard Lutnick stated that once his appointment as Secretary of Commerce is confirmed by the Senate, he will resign from his positions at Cantor, BGC and Newmark, and plans to divest his interests in his company to comply with government ethics regulations.
Wall Street billionaire Howard Lutnick has 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 the Wall Street financial giant Cantor Fitzgerald, but also the co-chairman 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 However, he has not completely withdrawn from the management of his financial companies while serving on the transition team.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, said the Trump team's approach "seriously overstepped the mark." He pointed out: "They have strayed far from the entire framework of processes and rules that have been put in place to ensure that future leaders serve the public interest, not their own private interests."
Critics argue that Lutnick's companies, including the financial services firm Cantor and the brokerage firm BGC Group, are involved in almost all sectors of the U.S. economy, from healthcare to technology. Newmark Group, a publicly traded company chaired by Lutnick, provides consulting services for commercial real estate globally. Cantor and BGC's clients may be widely affected by government policies and regulations, such as Trump's desire to maintain low corporate tax rates and the Food and Drug Administration's (FDA) decisions on new drug approvals. Faced with questions about financial soundness, Lutnick has publicly defended the stablecoin issuer Tether.
In addition, Lutnick also relies on the help of lobbyist and fundraiser Jeff Miller, who has close ties to the Trump circle and congressional Republicans, and has assisted Tether in 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 also helped Lutnick establish contacts with members of Congress.
Cantor's "deep cooperation" with Tether raises controversy
Last year, Cantor reached an agreement with the world's largest stablecoin issuer Tether, investing in Tether and acquiring about 5% of its shares. According to a report in The Wall Street Journal, Cantor's valuation of these shares is around $600 million. Tether currently holds billions of dollars in U.S. Treasuries through Cantor's custody business, which, according to insiders, generates tens of millions of dollars in annual revenue for Cantor.
Furthermore, according to a Bloomberg report, Cantor is in negotiations with Tether, seeking financial support for its recently announced bitcoin financing business. Under this plan, Cantor will initially provide $2 billion in bitcoin-collateralized loans to investors and plans to further expand the program.
After Lutnick's appointment, Cantor's role has become increasingly the focus of attention. Lutnick had proudly claimed that Tether allowed Cantor to fully review its financial situation. However, critics point out that this "trust model" is at odds with the "trust but verify" principle advocated in the crypto industry.
A recent Politico report pointed out that some "Trump insiders" are concerned that Lutnick is blurring the lines between his personal business interests and government responsibilities. The report stated that during his meetings with lawmakers on Capitol Hill, Lutnick should have focused on discussions about the transition government's work, but instead addressed regulatory issues that could impact his business interests, including his relationship with Tether.
Ethics experts have also expressed concerns about Lutnick's potential new role, believing that his Tether background may influence the Trump administration's selection of financial regulators. Richard Painter, an ethics lawyer for the former President George W. Bush administration, pointed out: "Having 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 regulation
On November 24, a Tether spokesperson stated: "Tether's relationship with Cantor Fitzgerald is purely professional, based on reserve management. The claim that Howard Lutnick's involvement in the transition team in any way means influence over regulatory actions is unfounded."
On November 25, Howard Lutnick stated that after being confirmed by the Senate, he will resign from his positions at Cantor, BGC and Newmark. Lutnick, who currently serves as the CEO of Cantor, plans to transfer the company's Tether business relationship to a colleague, who is likely to be his son Brandon Lutnick.
Whether Tether can use Lutnick's long-term relationship with Trump to prevent potentially USDC-favored legislation, criminal charges, or even preserve its assets under Cantor's management, remains to be seen.
Although Tether's market capitalization ($120.1 billion) is much higher than USDC's ($34.3 billion), USDC may gain more advantages in the regulatory field, such as becoming the first stablecoin to be approved under the EU's Crypto Asset Markets (MiCA) regulation this summer. Tether has criticized MiCA's requirements (such as requiring 60% of reserve assets to 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 been questioned for its lack of transparency. Tether has not yet conducted an independent third-party audit of its billions of dollars in fiat currency reserves (mainly U.S. Treasuries), while Circle has at least published the detailed CUSIP numbers of its reserve assets, seen as a step towards transparency.
Currently, there are several stablecoin-related bills being considered in the U.S. Congress, which may be put on the agenda during the "lame duck session" (the period between the election and the new Congress convening). These bills may provide advantages for "payment-focused stablecoins", a term generally interpreted as more favorable to Circle's USDC than Tether's USDT.
A Circle executive pointed out in a February congressional hearing that "opaque stablecoin issuers" could be exploited by terrorists and criminal organizations. Although she did not directly mention Tether and Cantor, another lawmaker bluntly criticized Cantor for providing a channel for Tether to enter the U.S. financial system.
Furthermore, Circle's political influence in the U.S. is growing, with its main donors such as Fairshake political action committees providing campaign funds for many pro-crypto currency lawmakers. If these lawmakers enter Congress, legislation related to USDC may be more easily passed, while Tether may face more scrutiny.
Looking ahead, Lutnick's placement of the Cantor-Tether relationship in the public and legislative spotlight 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 introduce more variables to the legislative, regulatory, and competitive landscape in this field.
