Howard Lutnick Faces Senate Scrutiny Over Tether Investment and USDT Stability
Senate Hearing Overview
Howard Lutnick, chairman of Cantor Fitzgerald and nominee for U.S. Commerce Secretary, faced questions from Senate Democrats regarding his firm's involvement with Tether, the entity behind the USDT stablecoin. The hearing, held on January 29, followed his earlier testimony before the Senate Banking Committee.
Cantor Fitzgerald's Role in Tether's Reserves
Cantor Fitzgerald serves as the primary custodian for U.S. Treasuries held by Tether and manages a significant portion of its reserves. Additionally, the firm holds convertible debt issued by Tether's parent company. Lutnick emphasized Cantor's role as custodian to reassure lawmakers about the stability of USDT reserves. However, he clarified that the firm does not conduct continuous diligence on Tether's financial statements.
Investment and Ownership Clarifications
Lutnick confirmed that Cantor Fitzgerald made a convertible debt investment in Tether's parent company in April 2024. He stressed that this investment does not grant ownership in Tether, aiming to address concerns about the firm's ties to the stablecoin issuer.
Stability Concerns and Market Sentiment
The stability of USDT remains a critical issue in the cryptocurrency industry. Betting markets indicate a 10% chance of Tether's insolvency by 2025 and a 14% chance of USDT de-pegging within the year. Critics have repeatedly called for an audit of Tether's finances due to USDT's significant impact on the crypto ecosystem.
Regulatory and Conflict of Interest Discussions
Lutnick denied allegations of promising to "defuse threats" against Tether and assured lawmakers that, if confirmed as Commerce Secretary, he would adhere to government ethics laws. He also cautioned Congress against legislation that could undermine the U.S. dollar's dominance in blockchain technology.
Conclusion
The hearing highlighted ongoing skepticism about Tether's financial stability and its implications for the broader cryptocurrency market. Lutnick's testimony aimed to clarify Cantor Fitzgerald's involvement with Tether while addressing concerns about regulatory conflicts and the need for oversight of stablecoin issuers.
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