Cash News
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CNN
—
Howard Lutnick, the Cantor Fitzgerald CEO who’s been tapped to run the US Commerce Department, has in recent years become a prominent cheerleader for Tether, the company behind one of the world’s biggest crypto assets.
But even by the standards of crypto — an alternative financial ecosystem in which some of the biggest frauds of the 21st century have taken place — Tether is a murky entity that has been dogged by investors’ concerns about its operations. It is effectively an unregulated, offshore bank that’s become a tent pole of the $3 trillion crypto industry.
The way it works, briefly: You give a buck to Tether and it gives you a digital token, the lowercase-T tether, that essentially functions as a digital US dollar in the crypto-verse.
The tether token is known as a stablecoin, a kind of crypto that was created to hold its value steady while others, like bitcoin and ether, swing wildly minute to minute. (Yes, even though they’re called crypto-currenciesthey’re actually a garbage way to buy things.)
While there’s a lot to say about the risks of tether, let’s focus for a moment the capital-T company that issues it and its No. 1 banker in the US, Lutnick.
Tether was founded a decade ago by Brock Pierce, a former child actor of “The Mighty Ducks” fame, and a former plastic surgeon named Giancarlo Devasini. The company is now one of the biggest players in crypto, with a daily trading volume that eclipses even bitcoin, the world’s most popular token. And like many companies in the largely unregulated space, it has come under regulatory and legal scrutiny.
The Wall Street Journal reported last month that the federal government is investigating Tether for possible violations of sanctions and anti-money-laundering rules. Citing unnamed sources, the Journal wrote that prosecutors from the Manhattan US attorney’s office are investigating whether tether has been used by third parties to fund drug trafficking, terrorism and hacking. At the same time, it reported the Treasury Department was considering sanctioning Tether because of how many bad actors, including Hamas and Russian arms dealers, rely on its stablecoin.
Tether told the WSJ in a statement that any suggestion it was involved in criminal activity was “outrageous” and that the company works actively with law enforcement to combat illicit activity. Tether’s CEO also stated on X that “the allegations in the article are unequivocally false.”
Tether didn’t immediately respond to CNN’s request for comment.
That was hardly the first crisis PR moment for the company, though. For years, questions had swirled about where Tether was stashing its billions of dollars in reserves. In 2021, Tether paid $61 million to New York authorities to settle charges that it was misrepresenting the assets that back its stablecoin (a big no-no that Tether chalked up to a communications oversight).
Questions have lingered in crypto circles about Tether’s reserves. The company is essentially an unregulated, offshore bank, untethered (as it were) from all those pesky reserve requirements and regulations that actual banks are subject to.
But Lutnick, a Bitcoin enthusiast whose Wall Street firm manages Tether’s stockpile of Treasury bills, has eagerly defended the stablecoin issuer.
“There’s always been a lot of talk — ‘do they have it or not’ — so I’m … saying, we’ve seen it and they have it,” Lutnick told Bloomberg in an interview on the sidelines of the World Economic Forum in Davos in January.
To be sure, Lutnick’s oversight of the Commerce Department — where he’d primarily be tasked with implementing President-elect Donald Trump’s tariff and trade agenda — gives him less sway over crypto policies than an appointment to the Treasury would have.
Representatives for Trump’s transition team didn’t immediately respond to a request for comment.
But Lutnick certainly isn’t the only crypto booster in Trump’s orbit, and the president-elect himself has done a 180 on the sector, which he previously dismissed as a scam. That change of heart happened to coincide with crypto billionaires plowing millions of dollars into his reelection campaign.
The more exciting news for crypto fans is less about the crypto fans coming in than the crypto opponents who are leaving, namely the Securities and Exchange Commission Chair Gary Gensler, who aggressively fought the industry’s expansion in the United States.
Since the decisive US election, bitcoin, a crypto market bellwether, has shot up more than 30%, bolstered by expectations that the regulatory stranglehold, as the industry sees it, is over.
“All of us who are in the industry have a lot of conviction that the technology will be the foundation of the financial architecture of the future,” Faryar Shirzad, chief policy officer at Coinbase, told me last week. “It’s just been the hostility from the regulators that have held them back.”