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 known for his close ties with stablecoin issuer Tether's custody business, has been revealed to have had his company Cantor Fitzgerald enter into an agreement with Tether last year, investing in Tether and acquiring about 5% of its shares.

There are concerns that Lutnick will be unable to avoid violating the transition team's own code of ethics. These guidelines align with U.S. federal conflict of interest rules, 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 reports, Howard Lutnick stated that once the Senate confirms his appointment as Commerce Secretary, 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 Takes on Dual Role

Howard Lutnick's recent nomination as U.S. Secretary of Commerce 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 government, 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 non-profit government management organization Partnership for Public Service, stated that the Trump team's approach "seriously oversteps." He pointed out, "They have strayed far from the entire 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 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 stability, 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 connect with congressional members.

Cantor and Tether's "Deep Cooperation" Sparks Controversy

Last year, Cantor entered into 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, and this custodial relationship reportedly generates tens of millions of dollars in revenue for Cantor each year.

Moreover, Bloomberg reported that Cantor is negotiating with Tether for funding to support its newly announced Bitcoin financing business. Under this plan, Cantor will initially offer $2 billion in Bitcoin collateralized loans to investors and plans to further expand the project.

Following Lutnick's appointment, Cantor's role has increasingly come into focus. Lutnick has proudly claimed that Tether allows Cantor to conduct a comprehensive review of its financial status. However, critics argue that this "trust model" contradicts the crypto industry's advocated principle of "don't trust, verify."

A recent report by Politico noted that some "insiders from Trump" 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 should have focused on discussions about the transition government's work but instead addressed 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 financial regulators. Richard Painter, an ethics lawyer from the George W. Bush administration, stated, "Putting someone from the crypto industry in charge of selecting financial regulators is asking for trouble."

Competition Among Stablecoin Issuers: USDC May Gain More Regulatory Advantage

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's joining the transition team somehow implies influence over regulatory actions are absurd."

On November 25, Howard Lutnick stated that he would resign from Cantor, BGC, and Newmark after Senate approval. Lutnick, who currently serves as CEO of Cantor, 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 or criminal charges that may favor USDC, or even protect its assets managed under Cantor, remains to be seen.

While Tether's market capitalization ($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 under the EU's Markets in Crypto-Assets (MiCA) regulation this summer. Tether has criticized MiCA's requirements (such as the need for 60% of reserve assets to be held in EU banks), arguing that these regulations increase risk.

In the U.S., Tether is reportedly under scrutiny by regulators for anti-money laundering issues. Compared to Circle, Tether faces questions regarding transparency. Tether has yet to undergo an independent third-party audit of its billions of dollars in fiat reserves (primarily U.S. Treasury bonds), while Circle has at least disclosed detailed CUSIP numbers for its reserve assets, seen as a step toward transparency.

Currently, several stablecoin-related bills are being developed 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 convening of the new Congress). These bills could 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. While she did not directly mention Tether and Cantor, 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 like Fairshake and other political action committees providing campaign funding to many pro-crypto lawmakers. If these lawmakers enter Congress, legislation related to USDC may be more easily passed, 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 government. Tether's dominant position in the stablecoin market and the controversies it has sparked also introduce more variables into the legislative, regulatory, and competitive landscape in this field.

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