Commerce Secretary Nominee Lutnick: US Dollar Stablecoins Need Audits and Treasury Backing

Howard Lutnick, President Trump’s nominee for U.S. Commerce Secretary, faced intense scrutiny during a Senate hearing over his ties to Tether and the potential misuse of its USDT stablecoin. Stablecoins, cryptocurrencies designed to maintain a stable value often pegged to fiat currencies like the US dollar, have come under the microscope due to their potential role in facilitating criminal activities. Amid these concerns, Lutnick proposed that US dollar stablecoins should be audited and backed entirely by U.S. Treasuries.

• Lutnick faced scrutiny over Tether ties.
• Calls for US dollar stablecoins to be audited and backed by U.S. Treasuries.
• Tether denies wrongdoing despite past issues.

During the Senate Commerce Committee hearing, Lutnick, who also heads Cantor Fitzgerald, a custodian for Tether, was grilled by ranking Democrat Maria Cantwell. The focus was squarely on his involvement with Tether and allegations that USDT has been used for illegal activities by groups in China, North Korea, and Russia. Lutnick defended stablecoins by drawing a parallel to technology misuse, stating, “It’s like blaming Apple because criminals use Apple phones.” He further argued that fiat currency is more commonly used for criminal purposes than stablecoins.

The scrutiny on Tether isn’t new. In 2023, Republican lawmakers raised concerns about Binance and Tether’s possible involvement in terror financing. The heat intensified when The Wall Street Journal reported in 2024 about ongoing U.S. investigations into Tether for potential sanctions violations and money laundering. Despite these allegations, Tether’s CEO, Paolo Ardoino, has denied any wrongdoing, insisting that the company provides quarterly attestations. However, many experts argue that these attestations fall short of the professional audits required for true transparency.

In 2021, Tether faced a significant setback when it settled with the Commodity Futures Trading Commission (CFTC) for a $41 million civil penalty after misrepresenting that its USDT was always fully backed by reserves. Yet, amidst these challenges, Lutnick remains firm in his belief, asserting, “U.S. dollar stablecoins should be audited” and “completely backed by U.S. Treasuries, 100%.”

Should Lutnick be confirmed as Commerce Secretary, he plans to prioritize job creation and collaborate on digital asset policies. He has committed to divesting from all his business interests, including his role at Cantor Fitzgerald, stating, “I will divest, I will sell all of my interests, my business interests, all of my assets, everything.”

The debate around stablecoins and their regulation continues, with Lutnick’s nomination bringing a critical perspective to the forefront. His call for audits and full backing by U.S. Treasuries aligns with a push for greater transparency in the crypto world, yet the challenges and potential for misuse loom large. As we navigate this complex landscape, the future of stablecoins and the broader cryptocurrency ecosystem hangs in balance. Whether Lutnick’s vision for audited and treasury-backed stablecoins becomes a reality could set the tone for how these digital assets are perceived and regulated moving forward.

From a Bitcoin maximalist viewpoint, the controversy surrounding stablecoins like USDT underscores the argument for Bitcoin’s decentralized nature. Bitcoin enthusiasts often critique stablecoins for their centralized control and potential to be manipulated by authorities. However, they also acknowledge that stablecoins play a crucial role in providing liquidity and stability within the broader crypto ecosystem, which even Bitcoin relies upon to some extent.

While Lutnick’s proposal may enhance transparency and stability, it also raises concerns about increased government oversight. Critics argue that such measures could stifle the innovation and financial freedom that cryptocurrencies promise. As the debate unfolds, the crypto community remains divided on the best path forward, with some advocating for self-regulation and others calling for more stringent oversight.

Key Takeaways and Questions

• What is the main issue Howard Lutnick faced during the Senate hearing?

  The main issue was his ties to Tether and the potential misuse of Tether’s USDT stablecoin for criminal activities.

• What did Howard Lutnick propose about U.S. dollar stablecoins during the hearing?

  He proposed that U.S. dollar stablecoins should be audited and completely backed by U.S. Treasuries.

• How did Tether respond to allegations of criminal use and insufficient audits?

  Tether and its CEO, Paolo Ardoino, denied the allegations and claimed to provide quarterly attestations, though these are considered insufficient by many.

• What action did Tether take following the CFTC’s investigation?

  Tether paid a $41 million civil penalty to the CFTC in 2021 for misrepresenting its reserves.

• What is Howard Lutnick’s plan if he is confirmed as U.S. Commerce Secretary?

  He plans to focus on job creation, collaborate on digital asset policies, and divest from all his business interests, including his role at Cantor Fitzgerald.