\n<\/p>\n
U.S. President Donald Trump has found yet another way to make \u2018crypto\u2019 bank while Tether\u2019s biggest Wall Street fan says artificial intelligence (AI) will scrub away its crypto crime stains.<\/p>\n
On January 29, Howard Lutnick, the boss of Wall Street financial services firm Cantor Fitzgerald (NASDAQ: ZCFITX) and Trump\u2019s 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).<\/p>\n
On January 27, Sen. Elizabeth Warren (D-MA) sent Lutnick a letter demanding answers on his Tether ties. Warren expressed \u201cserious concern\u201d regarding Lutnick\u2019s \u201cdeep involvement with and support for Tether, a known facilitator of criminal activity.\u201d Warren said Lutnick\u2019s Tether link \u201craises concerns about your judgment and ability to put the interests of the American people ahead of your own financial interests.\u201d<\/p>\n
But Warren doesn\u2019t 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\u2014and yet she holds an \u2018F\u2019 rating from the astroturf group Stand With Crypto\u2014but referenced Tether as among her concerns regarding Lutnick\u2019s private sector ties.<\/p>\n
During her five minutes of interrogating Lutnick, Cantwell addressed Tether\u2019s 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\u2019s 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.<\/p>\n
Lutnick said he believes dollar-denominated stablecoins \u201cshould be audited, should be completely backed by U.S. Treasuries 100%.\u201d And yet Tether\u2019s quarterly attestations\u2014which aren\u2019t audits\u2014show 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.<\/p>\n
Back to the top \u2191<\/em><\/p>\n Who owwwwwwnnns Tether?<\/strong><\/p>\n 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, \u201cA Tether? (As in, a single USDT token.) No.\u201d Pressed for clarity, Lutnick denied that he had any personal ownership stake in Tether and similarly claimed Cantor \u201chas no equity in Tether.\u201d<\/p>\n 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, \u201cCantor Fitzgerald owns a convertible bond with Tether.\u201d<\/p>\n Moving on, Cantwell wondered how legislators\/regulators might address the $19 billion or so in annual illicit activity that Tether facilitates.<\/p>\n Lutnick played his moral relativity card, saying that the \u201cnumber one instrument of criminals is the U.S. dollar, number two is the Euro \u2026 Tether is the largest stablecoin so criminals use it more than Circle (issuer of USDT rival USDC) \u2026 It\u2019s like blaming Apple because criminals use Apple phones. (Tether\u2019s) just a product. We don\u2019t pick on the U.S. Treasury because criminals use dollars.\u201d<\/p>\n Lutnick added that he\u2019d \u201casked (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.\u201d<\/p>\n Cantwell said she was more interested in the big picture of \u201cWhy aren\u2019t we taking more seriously a potential $19 billion illicit market that\u2019s going against the United States? \u2026 What do you recommend we do to get a handle on that?\u201d<\/p>\n Lutnick claimed his and Cantor\u2019s due diligence concluded that \u201cTether did no business with anyone who wasn\u2019t KYC (know your customer) appropriate.\u201d Lutnick was referring to crypto market-makers like Tether\u2019s biggest customer, Cumberland DRW, as Tether doesn\u2019t sell to retail customers.<\/p>\n Pressed as to whether secondary crypto markets needed tighter regulations vis-\u00e0-vis Tether, Lutnick basically said not to worry, that \u201cAI 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.\u201d<\/p>\n Back to the top \u2191<\/em><\/p>\n Tether\u2019s the cancer, AI\u2019s the cure<\/strong><\/p>\n The next Tether reference didn\u2019t come until nearly three hours into the hearing when Sen. John Hickenlooper (D-CO)\u2014another \u2018F-rated\u2019 pol\u2014referenced Russia and Iran using USDT to bypass economic sanctions. Hickenlooper also detailed Americans falling victim to \u2018pig butchering\u2019 scams before asking how to crack down on these illicit uses.<\/p>\n Lutnick said the solution was \u201cto 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\u2019s what we should require. Makes perfect sense.\u201d<\/p>\n To sum up, Lutnick\u2019s 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\u2019s 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.<\/p>\n Back to the top \u2191<\/em><\/p>\n Battle of the Trump pals<\/strong><\/p>\n Interestingly, two of the committee\u2019s most recognizably pro-crypto members\u2014Sen. Cynthia Lummis (R-WY) and Sen. Bernie Moreno (R-OH)\u2014said nothing whatsoever about Tether or even crypto during their allotted five minutes. Moreno\u2019s silence was particularly odd, given that companies like the Coinbase (NASDAQ: COIN) exchange\u2014which is a partner with Circle on USDC\u2014spent over $40 million getting Moreno elected last year.<\/p>\n As a USDC partner, Coinbase would benefit enormously from U.S. stablecoin legislation that imposes requirements Tether doesn\u2019t appear capable of meeting. Coinbase has already delisted USDT in Europe to comply with that continent\u2019s regulations. CEO Brian Armstrong recently suggested it could do likewise stateside if Tether proved unable\/unwilling to comply with tighter U.S. rules.<\/p>\n As such, it seems odd that Moreno wouldn\u2019t seize the opportunity to repay his patrons by publicly twisting the knife in Tether\u2019s side. But hey, senators don\u2019t have to face reelection for six years, so perhaps Moreno figures he\u2019s got time to kill before vengeful crypto \u2018broligarchs\u2019 start funding primary challenges.<\/p>\n In certain circles, Tether\u2019s cozying up to Lutnick is viewed as its insurance policy should U.S. stablecoin legislation attempt to erect barriers that Tether can\u2019t clear. Lutnick is a close personal friend of Trump and could conceivably lobby the notoriously transactional president on some kind of \u2018accommodation\u2019 for Tether.<\/p>\n But Coinbase isn\u2019t bringing a knife to this \u2018friends of Don\u2019 gunfight. As Lutnick was being grilled, Coinbase announced the appointment of four new \u201cpolitical and economic leaders\u201d to its Global Advisory Council. Among these four is none other than Chris LaCivita, the co-manager (along with Trump\u2019s new chief-of-staff Susie Wiles) of Trump\u2019s recent campaign victory.<\/p>\n That said, some theorize that Cantor\u2019s lack of \u2018equity\u2019 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 \u2018convertible bond.\u2019 So perhaps Tether\u2019s ace in the hole could prove more like a trapdoor spider.<\/p>\n Back to the top \u2191<\/em><\/p>\n Trump Media\u2019s quarter-billion crypto bet<\/strong><\/p>\n The only non-Tether crypto-related question tossed Lutnick\u2019s way on Wednesday was when Cantwell asked if he\u2019d \u2018advised\u2019 Trump regarding his decision to launch a memecoin three days before his inauguration. Lutnick said he hadn\u2019t.<\/p>\n The fiat value of Trump\u2019s \u2018collectible\u2019 token currently sits just under $28, well off its $72 peak. But Trump\u2014who controls the entities that control the vast majority of the $TRUMP token supply\u2014has 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.<\/p>\n And $TRUMP can now be used to purchase other Trump swag\u2014ugly watches, ugly shoes, the none-more-manly aromas of Trump cologne\u2014via their respective websites.<\/p>\n Then there\u2019s 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.<\/p>\n On January 29, the Trump-controlled Trump Media and Technology Group (TMTG), which operates the Truth Social platform, announced that its board had \u201capproved a financial services and financial technology strategy, which will include the launch of the financial services and FinTech brand Truth.Fi.\u201d<\/p>\n TMTG plans to take \u201cup to $250 million\u201d 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\u2019s advisor on how to spend this cash.<\/p>\n TMTG will allocate the $250 million to \u2018customized\u2019 separately managed accounts, \u2018customized\u2019 exchange-traded funds (ETFs), and buying BTC \u201cand similar cryptocurrencies or crypto-related securities.\u201d This would be something of a presidential perk, as regular Charles Schwab customers can\u2019t use their accounts to purchase digital assets directly, only crypto-based ETFs and the like.<\/p>\n The more lofty goals of this $250 million outlay are focused on \u201cinvestments in American growth, manufacturing, and energy companies as well as investments that strengthen the Patriot Economy.\u201d (As opposed to the Traitor Economy, which until recently had been doing boffo business.)<\/p>\n TMTG CEO\/chair Devin Nunes\u2014the former congressman who has a thing about cows\u2014called Truth.Fi \u201ca natural expansion of the Truth Social movement.\u201d TMTG says Truth.Fi\u2019s planned financial projects\/products\u2014which totally<\/em> aren\u2019t mirages intended to mask what is a simply crypto speculation vehicle\u2014\u201cwill be rolled out in 2025.\u201d<\/p>\n Back to the top \u2191<\/em><\/p>\n Operation blow me 2.0<\/strong><\/p>\n On January 28, the Senate Banking Committee announced its witness lineup for its February 5 hearing on \u201cInvestigating the Real Impacts of Debanking in America.\u201d The hearing will shine a spotlight on Operation Choke Point 2.0, the conspiracy theory that President Joe Biden\u2019s administration pressured banks into\u00a0ditching clients associated with conservative causes, including individuals\/entities involved in crypto, just because it could.<\/p>\n 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 \u2018legal and regulatory primer\u2019 for the American Bar Association.<\/p>\n Committee chair Tim Scott (R-SC) has also invited \u201cbusinesses and individuals who have been debanked to report allegations to his committee staff\u201d via a \u2018whistleblower\u2019 email address. Blowers are cautioned that they\u2019ll need to supply details of their allegations, so best start working on your debanking fan fiction ahead of time.<\/p>\n Back to the top \u2191<\/em><\/p>\n Fed up with crypto banking<\/strong><\/p>\n Since Trump\u2019s inauguration, the CEOs of several U.S. tradfi giants\u2014including Bank of America (NASDAQ: BAC), JPMorgan Chase (NASDAQ: JPM) and Morgan Stanley (NASDAQ: MS)\u2014have indicated they\u2019d be all over digital assets if they got a clear signal from regulators that transacting in same was copacetic.<\/p>\n On January 29, Federal Reserve Board chair Jerome Powell gave a press conference at which he was asked about\u00a0the Treasury Department\u2019s Financial Stability Oversight Council\u2019s inclusion of \u2018crypto\u2019 risks in its 2024 annual report.<\/p>\n That report\u2014like previous reports\u2014said stablecoins \u201crepresent a potential risk to financial stability because they are acutely vulnerable to runs absent appropriate risk management standards.\u201d Stablecoins\u2019 market concentration\u2014aka Tether\u2019s dominant share of the overall stable pie\u2014could \u201ccreate knock-on effects for the traditional financial system\u201d in the event of Tether\u2019s failure.<\/p>\n Powell said the Fed\u2019s role regarding digital assets \u201cwas to look at the banks \u2026 banks are perfectly able to serve crypto customers as long as they understand and can manage the risks and it\u2019s safe and sound.\u201d<\/p>\n Powell clarified that \u201cthe threshold has been a little higher for banks engaging in crypto activities and that\u2019s because they\u2019re so new and we don\u2019t want to make the mistake \u2026 If you\u2019re making the choice to conduct that activity inside a bank\u2014which is inside the federal safety net, with deposit insurance\u2014then you want to be pretty sure that it\u2019s a safe-and-sound activity.\u201d<\/p>\n Powell added that the Fed is \u201cnot against innovation and we certainly don\u2019t 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.\u201d<\/p>\n Back to the top \u2191<\/em><\/p>\n We have reservations, but we\u2019re coming anyway<\/strong><\/p>\n The BTC token\u2019s fiat price got a boost following Powell\u2019s comments, but not enough to regain the heights it enjoyed before Trump crushed the dreams of a \u2018strategic BTC reserve\u2019 in favor of a mongrel stockpile of sh*tcoins.<\/p>\n That hasn\u2019t stopped individual U.S. states from forging ahead with their own BTC reserve plans. This includes Texas, whose Lt. Gov. Dan Patrick put \u2018Establishing the Texas (BTC) Reserve\u2019 on his list of \u2018priority\u2019 bills he wants the state legislature to pass this year.<\/p>\n Patrick\u2019s priority list came one day after he told Fox News there was \u201cno daylight between President Trump and I\u201d on Trump\u2019s desire to expand America\u2019s AI and crypto capabilities. Patrick alarmed block reward miners last year when he warned that their operations were straining the state\u2019s electrical grid, but Patrick now says he and Trump are \u201ccompletely aligned.\u201d<\/p>\n There\u2019s 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\u2019t mean much. Bills have made some committee-stage progress in Arizona and Utah, but with Arizona\u2019s 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.<\/p>\n Still, dreams of a federal BTC boondoggle die hard. In response to reports that the Czech Republic\u2019s 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.<\/p>\n Lummis tweeted: \u201cIf you\u2019re not first, you\u2019re last. America must take decisive action to establish a Strategic (BTC) Reserve and secure its place in the 21st\u00a0century.\u201d Lummis might as well have added, \u201cIt\u2019s either buy billions\u2019 worth of BTC or face 1,000 years of darkness!\u201d Honey, have you seen my credit card?<\/p>\n Back to the top \u2191<\/em><\/p>\n Chief v Eagles v Crypto<\/strong><\/p>\n Speaking of existential despair, you might want to skip this year\u2019s 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 \u201ctech companies\u201d are said to be among the most avid buyers of 30-second spots costing up to $8 million apiece.<\/p>\n With crypto bros currently feeling untouchable, it\u2019s a safe bet that we\u2019ll see some truly cringeworthy come-ons. The frequency might even rival the deluge of crypto ads in 2022\u2019s 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\u2019s Super Bowl to zero.<\/p>\n But hey, look on the bright side. Pride (and hubris) goeth before a fall, so with any luck, this year\u2019s crypto ad deluge will prove the last hurrah before this latest bubble bursts.<\/p>\n Back to the top \u2191<\/em><\/p>\n Watch: Teranode is the digital backbone of Bitcoin<\/p>\n