From Crypto Bros to Commerce Secretary Pick: Howard Lutnick’s Glaring Conflicts of Interest | Trump administration

“What matters most to me are America’s interests.”

Howard Lutnick, chairman and CEO of Wall Street investment bank Cantor Fitzgerald, was Donald Trump’s nominee for the next Secretary of Commerce. to talk To an audience of cryptocurrency enthusiasts last April.

“I can’t be bought. Yes? There’s no way that someone is going to come along and say, ‘I’ll give you a dollar, and can you do this or that or something else.'” “What matters to me is what’s great about America. “The dollar is great for America.”

As senators consider confirming Lutnick in the coming weeks, they will be asked to allow one of the Bitcoin banking tycoons to lead an agency with an important role in the world of cryptocurrencies. The Commerce Department shapes domestic economic policy and international trade policy, and has “significant influence on the cryptocurrency industry,” said Tonya M. Evans, a Penn State law professor, financial technology specialist and author of “Digital Money Demystified.” She added that the conflict of interest should give people pause.

“Ultimately, it is important that public confidence in our leadership is not undermined by serious conflicts or even the suggestion of wrongdoing,” she said. “Trust in government – like cryptocurrencies – is very low. The industry has a golden opportunity to reshape the image of cryptocurrencies. Clear ethical governance is critical not only for innovation but also for the long-term stability of the cryptocurrency economy and the broader US economy.” .

Lutnick’s relationship with cryptocurrencies indicates how much things have changed. The Biden administration has orchestrated, with the massive fraud of FTX, once one of the world’s largest cryptocurrency exchanges, and the downfall of its disgraced founder Sam Bankman-Fried, top of their minds.

But Lutnick has established himself as one of the most prominent proponents of cryptocurrencies in global finance, and one of the industry’s leading advocates for a type of cryptocurrency called a stablecoin. His company Cantor Fitzgerald is a banker for the world’s most widely used stablecoin: Tether, which uses blockchain technology to allow people around the world to transfer money in dollar-denominated units.

“Lutnick’s deep knowledge and experience in the cryptocurrency industry is undisputed, but his deep ties to Tether and special interest in its success raise real concerns about potential or actual conflicts of interest, especially given Tether’s not only central, but fundamental, role in decentralized finance.” Evans said, referring to decentralized finance. “As a result, we can expect crypto skeptics in the Senate, especially those who serve on the market and banking oversight committees, to aggressively question him during confirmation.”

Tether represents the world’s most traded cryptocurrency – more than Bitcoin – and is currently the third-largest cryptocurrency by market cap. About $137 billion worth of Tether coins are in circulation digitally. Tether’s market cap rose 50% last year I mentioned.

The value of Bitcoin fluctuates wildly, but a unit of Tether, which is denoted as $USDT in cryptocurrency markets, is designed to mitigate this volatility by pegging it to the dollar. Tether claims that every dollar of its currency is backed by a dollar of reserves in banks around the world.

Cantor Fitzgerald holds US Treasury securities. Regulators have sought Tether to prove it has the reserves, says its founder and CEO, Italian computer scientist Paolo Ardoino, who owns it.

since 2021 Tether provides detailed, publicly available analysis of its reserve assets, the company said. These reserves have not yet been subject to public review by a third party. “Arduino secures external audit,” he said.It remains a high priority“.

“Despite the growth of the sector, cryptocurrency companies have struggled to access bank accounts and services that traditional financial companies take for granted,” a company spokesperson said. “The lack of global standards and regulations makes audits of cryptocurrency companies a significant risk for the Big 4 accounting firms, especially since the collapse of FTX.”

The nature and quality of Tether’s reserves have long been in question among its critics.

“It’s supposed to be collateralized by a variety of relatively liquid assets, and historically, there have been some misrepresentations about the quality of those assets,” said Bennett Tomlin, head of research at Protos Media, an observer and critic of Tether.

“At this point, it appears that Tether has more assets, and people like Howard Lutnick have been willing to publicly confirm the quality and quantity of those assets.”

Over the years, Tether has been criticized by federal regulators who have cracked down on the use of stablecoins in secondary markets to finance terrorism, and facilitate the use of stablecoins in secondary markets. Cyber ​​crimes, Money laundering and Sale of primary chemicals To manufacture illicit drugs.

But as the rope began cooperation As federal criminal investigations into illegal activity — and as the interest rate environment made holding Treasuries more financially advantageous — questions about Tether’s holdings began to fade.

A Tether spokesperson noted that the company was help Law enforcement, freezing more than $2 billion in assets in coordination with… 220 Law enforcement agencies in 51 jurisdictions.

Lutnick has made no secret of how he has gone to great lengths to support Tether, even as competitors have sought to undermine the currency. Bankman Fried, the jailed former billionaire CEO of FTX, tried to fall into a liquidity trap in 2022 by redeeming $10 billion of Tether in one go, Lutnick told bitcoin investors last year at a conference in Nashville. Because Cantor is one of 24 major dealers of U.S. Treasury securities for the U.S. government, it was able to fulfill the redemption request immediately, Lutnick said.

This event, and Lutnick’s event support From its holdings in the past year, it appears to have eased market questions about Tether’s assets.

“From what I’ve seen — and we’ve done a lot of work — they have the money they say they have,” Lutnick told Bloomberg TV last year.

Cantor Fitzgerald lost two-thirds of its New York workforce in the September 11 attacks, including Lutnick’s brother. Suggestion that cord Facilitated terrorism He said Lutnick left angry.

“We will never be associated with a company that has anything to do with jihad. “This disgusts me,” he said at a Bitcoin conference last year. “Tether will seize any amount of coins in illicit activity.”

Lutnick and Trump are longtime friends. Lutnick raised money for Trump’s re-election campaigns in 2020 and 2024. There were many discussions about appointing Lutnick as chief of staff or Treasury secretary before Trump announced his candidacy for the trade position.

As head of Trump’s transition team, Lutnick did just that to speak In terms of personal loyalty around ensuring that administration appointees are fully committed to Trump’s agenda.

“You can argue all you want and debate it, but when your boss says this is what we’re going to do, do you have a problem doing what your boss says they’re going to do? You always have two options. You can quit or you can implement the plan.”

Lutnick intends to hand over control of Cantor Fitzgerald’s SPAC to his 26-year-old son Brandon, who used to work at Tether.

“The incoming administration is not particularly concerned about conflicts of interest,” Tomlin said. “In many cases, it seems to me that a conflict of interest is almost a prerequisite… Handing over the business to your son seems like an unsatisfactory way to ensure that you are separate from the way your executive decisions affect that business.”

As Commerce Secretary, Lutnick will be responsible for implementing Trump’s tariff agenda. He said tariffs are a bargaining chip to attack protectionist trade policies in Europe and Asia. But the Commerce Department also has a regulatory role in the cryptocurrency business, which could put Tether and other stablecoins at a competitive disadvantage if the federal government issues its own digital currency.

Joe Biden had Issued An executive order in March 2022 began an exploratory process to issue digital dollars, a central bank digital currency.

Lutnick says an official government digital currency created by the US government will be banned in many countries as a means of espionage or to directly undermine the local currency. But the current alternative is a shadowy private company owned by foreign investors without direct responsibility or oversight from any US government entity.

Notably, Tether announced plans to move its headquarters to El Salvador on Monday. El Salvador has embraced cryptocurrency as a competitive advantage, transitioning its economy and currency to cryptocurrencies.

Last year, Senators Kirsten Gillibrand and Cynthia Lummis authored the bill Lummis-Gillibrand Stablecoin Payment Act of 2024which would regulate stablecoins.

State agencies will regulate stablecoins with assets of less than $10 billion, while larger offerings — such as Tether, and its competitor Circuit — will be regulated by the Treasury Department’s Office of the Comptroller of the Currency. It will require stablecoins to hold reserve assets on a cash or one-to-one cash equivalent basis, authorize redemptions on demand, and will require monthly asset reporting.

This bill was not introduced last year.

Lutnick said he believed dollar-denominated stablecoins were expanding American influence, and was concerned that regulation in Europe and elsewhere would limit the expansion of Tether and other dollar-denominated cryptocurrencies.

“If a dollar-based stablecoin is backed by the euro, they should go to hell,” he said. “How does this help us?”