Cantor has ‘no equity’ in Tether, Trump makes $250M crypto bet

Getting your Trinity Audio player ready...

U.S. President Donald Trump has found yet another way to make ‘crypto’ bank while Tether’s biggest Wall Street fan says artificial intelligence (AI) will scrub away its crypto crime stains.

• Lutnick supports stablecoin audits
• Lutnick says AI will kill stablecoin crime
• Will Tether’s Trump buddy trump Coinbase’s Trump whisperer?
• Trump’s latest crypto scheme
• Senate names ‘debanking’ hearing witnesses
• Federal Reserve chair says no issues with banking crypto clients
• States pushing BTC reserve plans
• Brace yourself for crypto Super Bowl madness

On January 29, Howard Lutnick, the boss of Wall Street financial services firm Cantor Fitzgerald (NASDAQ: ZCFITX) and Trump’s nominee for Secretary of Commerce, sat for a Senate confirmation grilling that only briefly questioned his ties to Tether, the issuer of the largest stablecoin by market cap (USDT).

On January 27, Sen. Elizabeth Warren (D-MA) sent Lutnick a letter demanding answers on his Tether ties. Warren expressed “serious concern” regarding Lutnick’s “deep involvement with and support for Tether, a known facilitator of criminal activity.” Warren said Lutnick’s Tether link “raises concerns about your judgment and ability to put the interests of the American people ahead of your own financial interests.”

But Warren doesn’t have a seat on the Commerce committee, leaving it up to her colleagues to shoulder this load. In her opening remarks, ranking member Maria Cantwell (D-WA) described herself as a blockchain fan—and yet she holds an ‘F’ rating from the astroturf group Stand With Crypto—but referenced Tether as among her concerns regarding Lutnick’s private sector ties.

During her five minutes of interrogating Lutnick, Cantwell addressed Tether’s history of being repeatedly fined by state and federal regulators for failing to ensure that each of its tokens was backed 1:1 with dollars. Cantwell asked Lutnick, whose company allegedly custodies Tether’s alleged $100+ billion in U.S. Treasury bills if he agreed that stablecoins should submit to regular independent audits, something Tether has steadfastly refused to do.

Lutnick said he believes dollar-denominated stablecoins “should be audited, should be completely backed by U.S. Treasuries 100%.” And yet Tether’s quarterly attestations—which aren’t audits—show tens of billions in assets other than T-bills, including gold, the BTC token and even loans to unidentified third parties, some of which may not be unrelated parties.

Back to the top ↑

Who owwwwwwnnns Tether?

Cantwell then addressed reports that Lutnick and/or Cantor had taken a 5% ownership stake at some undetermined point. Asked if he owned Tether, Lutnick played cute, saying, “A Tether? [As in, a single USDT token.] No.” Pressed for clarity, Lutnick denied that he had any personal ownership stake in Tether and similarly claimed Cantor “has no equity in Tether.”

Growing frustrated, Cantwell pressed Lutnick harder, asking if he, as an investor or Cantor, owned a piece of Tether. Following a pregnant pause, Lutnick said, “Cantor Fitzgerald owns a convertible bond with Tether.”

Moving on, Cantwell wondered how legislators/regulators might address the $19 billion or so in annual illicit activity that Tether facilitates.

Lutnick played his moral relativity card, saying that the “number one instrument of criminals is the U.S. dollar, number two is the Euro … Tether is the largest stablecoin so criminals use it more than Circle [issuer of USDT rival USDC] … It’s like blaming Apple because criminals use Apple phones. [Tether’s] just a product. We don’t pick on the U.S. Treasury because criminals use dollars.”

Lutnick added that he’d “asked [Tether] to and they are signed up with all U.S. federal law enforcement. They follow all federal law enforcement [requests to freeze individual USDT digital wallets] instantly.”

Cantwell said she was more interested in the big picture of “Why aren’t we taking more seriously a potential $19 billion illicit market that’s going against the United States? … What do you recommend we do to get a handle on that?”

Lutnick claimed his and Cantor’s due diligence concluded that “Tether did no business with anyone who wasn’t KYC [know your customer] appropriate.” Lutnick was referring to crypto market-makers like Tether’s biggest customer, Cumberland DRW, as Tether doesn’t sell to retail customers.

Pressed as to whether secondary crypto markets needed tighter regulations vis-à-vis Tether, Lutnick basically said not to worry, that “AI tools used by the U.S. government running through the blockchain of stablecoin issuers will rid the world of criminals using blockchain for illicit activity.”

Back to the top ↑

Tether’s the cancer, AI’s the cure

The next Tether reference didn’t come until nearly three hours into the hearing when Sen. John Hickenlooper (D-CO)—another ‘F-rated’ pol—referenced Russia and Iran using USDT to bypass economic sanctions. Hickenlooper also detailed Americans falling victim to ‘pig butchering’ scams before asking how to crack down on these illicit uses.

Lutnick said the solution was “to require anyone who is a U.S.-backed stablecoin must onboard U.S. law enforcement and must allow U.S. law enforcement and our AI tools into their models so that we can go find and catch the illicit activity. Remember, [blockchain is] a central book. That means it can be found, it can be traced. Our AI tools will rip illicit activity out of stablecoins within a year or two. Our technology on their blockchain will end it and that’s what we should require. Makes perfect sense.”

To sum up, Lutnick’s testimony can be boiled down to the following: Tether-based crime is a big nothingburger because the U.S. dollar is also used for crime. Also, there’s no need to take any action against Tether right now because AI will smite down those evildoers at some later date, just not now, nor on any verifiable schedule. So, let complacency be our watchword. Thank you. Peace out.

Back to the top ↑

Battle of the Trump pals

Interestingly, two of the committee’s most recognizably pro-crypto members—Sen. Cynthia Lummis (R-WY) and Sen. Bernie Moreno (R-OH)—said nothing whatsoever about Tether or even crypto during their allotted five minutes. Moreno’s silence was particularly odd, given that companies like the Coinbase (NASDAQ: COIN) exchange—which is a partner with Circle on USDC—spent over $40 million getting Moreno elected last year.

As a USDC partner, Coinbase would benefit enormously from U.S. stablecoin legislation that imposes requirements Tether doesn’t appear capable of meeting. Coinbase has already delisted USDT in Europe to comply with that continent’s regulations. CEO Brian Armstrong recently suggested it could do likewise stateside if Tether proved unable/unwilling to comply with tighter U.S. rules.

As such, it seems odd that Moreno wouldn’t seize the opportunity to repay his patrons by publicly twisting the knife in Tether’s side. But hey, senators don’t have to face reelection for six years, so perhaps Moreno figures he’s got time to kill before vengeful crypto ‘broligarchs’ start funding primary challenges.

In certain circles, Tether’s cozying up to Lutnick is viewed as its insurance policy should U.S. stablecoin legislation attempt to erect barriers that Tether can’t clear. Lutnick is a close personal friend of Trump and could conceivably lobby the notoriously transactional president on some kind of ‘accommodation’ for Tether.

But Coinbase isn’t bringing a knife to this ‘friends of Don’ gunfight. As Lutnick was being grilled, Coinbase announced the appointment of four new “political and economic leaders” to its Global Advisory Council. Among these four is none other than Chris LaCivita, the co-manager (along with Trump’s new chief-of-staff Susie Wiles) of Trump’s recent campaign victory.

That said, some theorize that Cantor’s lack of ‘equity’ in Tether could result in Cantor seizing the T-bills in its custody should Tether, for whatever reason, breach or default on the indenture of their ‘convertible bond.’ So perhaps Tether’s ace in the hole could prove more like a trapdoor spider.

Back to the top ↑

Trump Media’s quarter-billion crypto bet

The only non-Tether crypto-related question tossed Lutnick’s way on Wednesday was when Cantwell asked if he’d ‘advised’ Trump regarding his decision to launch a memecoin three days before his inauguration. Lutnick said he hadn’t.

The fiat value of Trump’s ‘collectible’ token currently sits just under $28, well off its $72 peak. But Trump—who controls the entities that control the vast majority of the $TRUMP token supply—has already made millions off the fees from selling the tokens to the public. Some put the fee revenue at $11 million, while others have suggested the total may be more than 5x that sum.

And $TRUMP can now be used to purchase other Trump swag—ugly watches, ugly shoes, the none-more-manly aromas of Trump cologne—via their respective websites.

Then there’s World Liberty Financial (WLF), the Trump-backed decentralized finance (DeFi) project that so far has done nothing except sell its WLFI token (to some seriously questionable characters) and use the proceeds to buy lots of other tokens.

On January 29, the Trump-controlled Trump Media and Technology Group (TMTG), which operates the Truth Social platform, announced that its board had “approved a financial services and financial technology strategy, which will include the launch of the financial services and FinTech brand Truth.Fi.”

TMTG plans to take “up to $250 million” of its $700 million cash reserves and custody it with brokerage firm Charles Schwab. In return, Charles Schwab is obligated to advertise on the digital ghost town that is Truth Social while also serving as TMTG’s advisor on how to spend this cash.

TMTG will allocate the $250 million to ‘customized’ separately managed accounts, ‘customized’ exchange-traded funds (ETFs), and buying BTC “and similar cryptocurrencies or crypto-related securities.” This would be something of a presidential perk, as regular Charles Schwab customers can’t use their accounts to purchase digital assets directly, only crypto-based ETFs and the like.

The more lofty goals of this $250 million outlay are focused on “investments in American growth, manufacturing, and energy companies as well as investments that strengthen the Patriot Economy.” (As opposed to the Traitor Economy, which until recently had been doing boffo business.)

TMTG CEO/chair Devin Nunes—the former congressman who has a thing about cows—called Truth.Fi “a natural expansion of the Truth Social movement.” TMTG says Truth.Fi’s planned financial projects/products—which totally aren’t mirages intended to mask what is a simply crypto speculation vehicle—“will be rolled out in 2025.”

Back to the top ↑

Operation blow me 2.0

On January 28, the Senate Banking Committee announced its witness lineup for its February 5 hearing on “Investigating the Real Impacts of Debanking in America.” The hearing will shine a spotlight on Operation Choke Point 2.0, the conspiracy theory that President Joe Biden’s administration pressured banks into ditching clients associated with conservative causes, including individuals/entities involved in crypto, just because it could.

The three witnesses named so far are Nathan McCauley, CEO/co-founder of digital asset custodian Anchorage Digital; Black Rifle Coffee Company founder Evan Hafer; and Davis Wright Tremaine LLP partner Stephen Gannon, who last year co-authored a crypto-focused ‘legal and regulatory primer’ for the American Bar Association.

Committee chair Tim Scott (R-SC) has also invited “businesses and individuals who have been debanked to report allegations to his committee staff” via a ‘whistleblower’ email address. Blowers are cautioned that they’ll need to supply details of their allegations, so best start working on your debanking fan fiction ahead of time.

Back to the top ↑

Fed up with crypto banking

Since Trump’s inauguration, the CEOs of several U.S. tradfi giants—including Bank of America (NASDAQ: BAC), JPMorgan Chase (NASDAQ: JPM) and Morgan Stanley (NASDAQ: MS)—have indicated they’d be all over digital assets if they got a clear signal from regulators that transacting in same was copacetic.

On January 29, Federal Reserve Board chair Jerome Powell gave a press conference at which he was asked about the Treasury Department’s Financial Stability Oversight Council’s inclusion of ‘crypto’ risks in its 2024 annual report.

That report—like previous reports—said stablecoins “represent a potential risk to financial stability because they are acutely vulnerable to runs absent appropriate risk management standards.” Stablecoins’ market concentration—aka Tether’s dominant share of the overall stable pie—could “create knock-on effects for the traditional financial system” in the event of Tether’s failure.

Powell said the Fed’s role regarding digital assets “was to look at the banks … banks are perfectly able to serve crypto customers as long as they understand and can manage the risks and it’s safe and sound.”

Powell clarified that “the threshold has been a little higher for banks engaging in crypto activities and that’s because they’re so new and we don’t want to make the mistake … If you’re making the choice to conduct that activity inside a bank—which is inside the federal safety net, with deposit insurance—then you want to be pretty sure that it’s a safe-and-sound activity.”

Powell added that the Fed is “not against innovation and we certainly don’t want to take actions that would cause banks to terminate customers who are perfectly legal just because of excess risk aversion maybe related to regulation and supervision.”

Back to the top ↑

We have reservations, but we’re coming anyway

The BTC token’s fiat price got a boost following Powell’s comments, but not enough to regain the heights it enjoyed before Trump crushed the dreams of a ‘strategic BTC reserve’ in favor of a mongrel stockpile of sh*tcoins.

That hasn’t stopped individual U.S. states from forging ahead with their own BTC reserve plans. This includes Texas, whose Lt. Gov. Dan Patrick put ‘Establishing the Texas [BTC] Reserve’ on his list of ‘priority’ bills he wants the state legislature to pass this year.

Patrick’s priority list came one day after he told Fox News there was “no daylight between President Trump and I” on Trump’s desire to expand America’s AI and crypto capabilities. Patrick alarmed block reward miners last year when he warned that their operations were straining the state’s electrical grid, but Patrick now says he and Trump are “completely aligned.”

There’s still only a handful of states that are mulling to establish their own BTC reserves. Most of these are simply a single legislator proposing a bill, which doesn’t mean much. Bills have made some committee-stage progress in Arizona and Utah, but with Arizona’s bill calling for up to 10% of public/private pension funds being spent on digital Beanie Babies, expect some serious pushback if/when it hits the legislature floor.

Still, dreams of a federal BTC boondoggle die hard. In response to reports that the Czech Republic’s central banker is mulling to establish a BTC reserve, Sen. Lummis, who last year introduced a bill requiring the government to buy up to a million additional BTC, unleashed her used-car-pressure-sales tactics.

Lummis tweeted: “If you’re not first, you’re last. America must take decisive action to establish a Strategic [BTC] Reserve and secure its place in the 21st century.” Lummis might as well have added, “It’s either buy billions’ worth of BTC or face 1,000 years of darkness!” Honey, have you seen my credit card?

Back to the top ↑

Chief v Eagles v Crypto

Speaking of existential despair, you might want to skip this year’s Super Bowl, not just because of the constant Taylor Swift reaction shots. The Associated Press reported that Fox has sold all its commercial space for the big game, and “tech companies” are said to be among the most avid buyers of 30-second spots costing up to $8 million apiece.

With crypto bros currently feeling untouchable, it’s a safe bet that we’ll see some truly cringeworthy come-ons. The frequency might even rival the deluge of crypto ads in 2022’s big game, which was the last before the endless run of frauds, rug-pulls and bankruptcies that dropped the number of crypto ads in 2023’s Super Bowl to zero.

But hey, look on the bright side. Pride (and hubris) goeth before a fall, so with any luck, this year’s crypto ad deluge will prove the last hurrah before this latest bubble bursts.

Back to the top ↑

Watch: Teranode is the digital backbone of Bitcoin