Wall Street billionaire Howard Lutnick, President Donald Trump’s pick for Commerce Secretary and a noted Bitcoin bull, said during his Senate confirmation hearing Wednesday that he would support government audits of stablecoin reserves.
Lutnick’s own firm, Cantor Fitzgerald, currently custodies billions of dollars in assets that back Tether, the world’s largest stablecoin. The world has had to take the company’s word for it, though, as no independent agency has verified how much fiat currency Cantor indeed holds on Tether’s behalf.
During a round of questioning today by Sen. Maria Cantwell (D-WA) on the lack of existing regulations for stablecoin reserves, Lutnick expressed support for mandatory inspections of such stockpiles.
“I believe U.S. dollar stablecoins should be audited, [and] should be completely backed by U.S. Treasuries, 100%,” he said.
When Cantwell followed up by asking whether the businessman believed America should adopt a particularly robust stablecoin reserve audit process more rigorous than existing processes, Lutnick replied: “For sure.”
Stablecoins like Tether are reportedly backed most commonly by billions of dollars worth of U.S. Treasuries. This backing increases confidence that the tokens will stay true to their name and remain pegged to the value of the U.S. dollar. In the past, uncollateralized stablecoins have crashed to zero, wreaking havoc on financial markets.
Given Tether’s current market capitalization of $139 billion, and the ballooning importance of stablecoins to the global economy, the token’s theoretical collapse due to a lack of collateralization could spell immense problems for the crypto industry.
In recent days, lawmakers including Sen. Elizabeth Warren (D-MA) have expressed concerns about Lutnick’s nomination to Commerce Secretary, given Tether’s reported popularity among criminals.
“Your record of support for and financial involvement with Tether, and that company’s ongoing connections to illicit finance and criminal activity, raise significant questions about your own personal judgment and the conflicts of interest that you will have if you are confirmed as Commerce Secretary,” Warren wrote in a letter sent to the billionaire earlier this week.
Warren did not attend Lutnick’s confirmation hearing, however—she was busy grilling Robert F. Kennedy, Jr. over his nomination to become Secretary of Health and Human Services.
In Warren’s absence, while Lutnick did face a question about Tether’s connection to criminal organizations, he appeared to bat it away with relative ease.
“It’s like blaming Apple because criminals use Apple phones,” Lutnick said in response to a question on the subject from Sen. Cantwell, arguing that Tether is tremendously popular, and thus is bound to be used by bad actors just as often as the U.S. dollar is.
He also said that Cantor Fitzgerald has no equity in Tether.
Lutnick did elaborate, though, that he is confident that the U.S. government will soon be able to harness AI tools that will run “through the blockchain of stablecoin issuers” and “rid the world of criminals using blockchain for illicit activity.”
Ultimately, questions about Lutnick’s relationship to Tether only took up a minor portion of the hourslong hearing, and did not appear to rattle the nominee.
Cantwell, the only senator to question Lutnick about digital assets on Wednesday, even went out of her way to clarify her support of the industry.
“I’m a big crypto person in general,” she assured the entrepreneur at the start of her questioning.
Edited by Andrew Hayward