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Howard Lutnick, the chairman of Cantor Fitzgerald and nominee for U.S. Commerce Secretary, faced questioning from Senate Democrats regarding the financial firm’s investment in Tether, the entity behind the world’s leading stablecoin, USDT.
The hearing, held before the Senate Committee on Commerce, Science, and Transportation on January 29, followed Lutnick’s testimony at the Senate Banking Committee the previous day.
Cantor Fitzgerald is notably the primary custodian for U.S. Treasuries held by Tether and manages a significant portion of its reserves. The firm also holds convertible debt issued by Tether’s parent company. Lutnick attempted to alleviate concerns about the reserves backing USDT by emphasizing Cantor’s role as custodian. However, during the hearing, he revised some of his previous assurances, stating, "Cantor Fitzgerald is not conducting continuous diligence on Tether’s financial statements, but I believe my statements were accurate when made."
Despite the ongoing skepticism surrounding Tether’s financial stability, Lutnick confirmed that Cantor Fitzgerald made a convertible debt investment in the holding company that owns Tether in April 2024. He clarified that this investment does not equate to an ownership interest in Tether, aiming to dispel any notion that Cantor’s ties to Tether are more extensive than previously disclosed.
The stability of USDT is a critical issue in the cryptocurrency industry, with betting markets such as Polymarket indicating a 10% chance of Tether insolvency by 2025 and a 14% chance it will de-peg within the year. Critics have long called for an audit of Tether’s books due to USDT’s significant impact on the crypto ecosystem. While Lutnick agreed that U.S. dollar stablecoin issuers should be audited, he did not extend this demand to Tether.
During the hearing, Lutnick addressed concerns over potential conflicts of interest regarding crypto regulation. He denied allegations that he had promised to "defuse threats" against Tether and emphasized that, if confirmed, he would perform his duties in accordance with government ethics laws and regulations. He also advised that Congress should be cautious not to jeopardize the U.S. dollar’s dominance on blockchain through legislation.
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