U.S. Treasury Bonds Dealer Voices Support for USDT, Humiliates USDC

Howard Lutnick spoke at the Bitcoin 2024 conference in Nashville. In his speech, he mainly reflected on the tragic events of 9/11, smoothly flowing into praise for Tether and USDT.

So, who is the guy?

Howard Lutnick is an American billionaire businessman who is the CEO and chairman of Cantor Fitzgerald and BGC Partners, global financial services companies.

Lutnick calls his companies the largest wholesalers in the world, trading everything, and claims their focus is on the digital space. In the speech, he offered support to those who intend to develop businesses in this field and stressed that he — and his companies — are huge fans of crypto, especially Bitcoin and Tether. 

Cantor Fitzgerald is one of 24 primary dealers authorized to trade U.S. government securities with the Fed.

Tether, Lutnick & a story of friendship

In July 2020, the Office of the Comptroller of the Currency said that banks could provide custody services and clear digital assets, and Lutnick went on a hunt “to meet everybody that matters.” When meeting Giancarlo Devasini, the Tether CFO and likely biggest shareholder, Howard asked him to show the money - and he did. That was the beginning of a beautiful friendship.

According to Lutnick, when Cantor Fitzgerald partnered with Tether, they verified all of Tether's assets, which included investments in Chinese commercial paper and other instruments. Lutnick insisted that these assets be converted to U.S. Treasuries held by Cantor, a primary dealer, thus ensuring liquidity. He also emphasizes that Tether works with 150 law enforcement agencies globally and that it was done with Cantor’s help.

In January 2024 (the speech says January 2023, which might be by accident), he first disclosed that his company manages Tether’s reserves when publicly defending USDT, supporting the company's claims of having adequate funds backing the asset. 

"From what I've seen – and we did a lot of work – they have the money they say they have,” - Lutnick in an interview with Bloomberg TV. 

Now, Lutnick says that his company has Tether’s back, and every redemption of any amount will be met as every penny is backed on a 1:1 ratio. Lutnick also defended Tether against accusations that it's backed by Jihad and Hamas, saying Cantor Fitzgerald would never be associated with a company that has anything to do with Jihad.

Tether vs. Circle by Lutnick

Lutnick stresses Tether's transparency and security, noting that it holds 114 billion in reserves and 11 billion in equity, making its assets 125 billion. He contrasts this with Circle whose uninsured 3.3 billion deposit in Silicon Valley Bank offered minimal interest, and their later collapse led to the stablecoin depeg. 

He also claimed that, unlike USDT, Circle has limited ability to redeem, referring to talks between his company and Circle when they wanted to start a joint business. 

"We hold their money. USDT is fundamentally different than USDC because USDT holds treasuries and primary dealer Cantor Fitzgerald can liquidate those treasuries and meet your redemptions without fail."

Interestingly, he believes that in 2022, Sam Bankman-Fried of FTX, in cahoots with Circle, attempted to destabilize Tether by redeeming $10 billion in USDT, which he says Cantor managed seamlessly.

Why does Lutnick promote USDT?

The more obvious and straightforward reason might be that Lutnick makes tons of money managing Tether’s reserves, and he wants people to use USDT – and that's it.

He also claims to believe that USDT supports the USD’s global position. When people in countries with high inflation rates use USDT, Tether consequently buys bonds, thus financing the U.S. treasury debt (and Lutnick's companies) and stabilizing the country’s financial situation.

The strong support from the TradFi colossus is encouraging but slightly too ecstatic and artificial. Although there is most likely a grain of truth in Lutnick’s speech, both his criticism of Circle and excitement about Tether seem exaggerated – but perfectly suited for marketing purposes.

And what about Bitcoin?

At the end of his ‘USDT-promo’ speech, Lutnick announced that Cantor Fitzgerald is launching a ‘Bitcoin financing business.’ Without providing many details, he said that the company would offer leverage to those who own Bitcoin and promised to start with $2 billion of initial financing.