tl;dr
Wall Street billionaire Howard Lutnick, President Donald Trump’s pick for Commerce Secretary, expressed support for government audits of stablecoin reserves during his Senate confirmation hearing. Lutnick, whose firm custodies assets backing Tether, advocated for mandatory inspections and 100% backi...
Howard Lutnick, nominee for Commerce Secretary, expressed support for government audits of stablecoin reserves during his Senate confirmation hearing. Lutnick's firm, Cantor Fitzgerald, custodies billions of dollars in assets backing Tether, the world's largest stablecoin, raising concerns about lack of independent verification. Lutnick advocates for mandatory inspections and 100% backing by U.S. Treasuries for U.S. dollar stablecoins.
Concerns raised by lawmakers, including Sen. Elizabeth Warren, about Lutnick's ties to Tether and its alleged links to illicit finance and criminal activity. Lutnick dismisses concerns, compares Tether usage by criminals to the use of U.S. dollar, and expresses confidence in future AI tools to combat illicit activities on blockchain.
Wall Street billionaire Howard Lutnick, President Donald Trump’s pick for Commerce Secretary, expressed support for government audits of stablecoin reserves during his Senate confirmation hearing. Lutnick, whose firm custodies assets backing Tether, advocated for mandatory inspections and 100% backing by U.S. Treasuries for U.S. dollar stablecoins. Concerns were raised about Tether's reported links to criminal activity, but Lutnick dismissed them, comparing Tether's popularity to that of the U.S. dollar. The discussion formed a minor part of the hearing, with Senator Cantwell clarifying her support for the crypto industry.
Stablecoins like Tether are reportedly backed most commonly by billions of dollars worth of U.S. Treasuries. This backing increases confidence that the tokens will stay true to their name and remain pegged to the value of the U.S. dollar. In the past, uncollateralized stablecoins have crashed to zero, wreaking havoc on financial markets. Given Tether’s current market capitalization of $139 billion, and the ballooning importance of stablecoins to the global economy, the token’s theoretical collapse due to a lack of collateralization could spell immense problems for the crypto industry.
In recent days, lawmakers including Sen. Elizabeth Warren (D-MA) have expressed concerns about Lutnick’s nomination to Commerce Secretary, given Tether’s reported popularity among criminals. “Your record of support for and financial involvement with Tether, and that company’s ongoing connections to illicit finance and criminal activity, raise significant questions about your own personal judgment and the conflicts of interest that you will have if you are confirmed as Commerce Secretary,” Warren wrote in a letter sent to the billionaire earlier this week. Warren did not attend Lutnick’s confirmation hearing, however—she was busy grilling Robert F. Kennedy, Jr. over his nomination to become Secretary of Health and Human Services.
Ultimately, questions about Lutnick’s relationship to Tether only took up a minor portion of the hourslong hearing, and did not appear to rattle the nominee. Cantwell, the only senator to question Lutnick about digital assets on Wednesday, even went out of her way to clarify her support of the industry. “I’m a big crypto person in general,” she assured the entrepreneur at the start of her questioning.