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Stablecoins and Tether draw lengthy questioning on illicit finance and oversight
Summary
Senators questioned Lutnick extensively about stablecoins, Tether and anti-money-laundering measures; the nominee favored US-backed, audited stablecoins and said blockchain analysis and AI tools can help detect illicit flows.
Howard Lutnick faced multiple rounds of questioning about stablecoins and the cryptocurrency issuer Tether, including whether U.S.-backed stablecoins should be audited and backed by U.S. Treasuries.
Why this matters: Stablecoins are increasingly important in digital markets and have been identified by some lawmakers as channels used for illicit finance. The Commerce Department may have a role in standards, export controls and coordinating with financial regulators on market integrity.
Sen. Maria Cantwell and other senators pressed Lutnick about Cantor Fitzgerald's historical ties and whether the nominee or his firms had holdings involving Tether. Lutnick said Cantor Fitzgerald "owns a convertible bond with Tether" and clarified that Cantor Fitzgerald "has no equity in Tether." He said he did not personally own Tether and that he and his firms complied with KYC processes when engaging with stablecoin issuers.
On regulation and oversight, Lutnick said "I believe stablecoins, US dollar stablecoins, should be audited, should be completely backed by US treasuries 100%." He argued that blockchain transactions are traceable and that law enforcement cooperation combined with new AI analytic tools could reduce illicit use of blockchain-based instruments. "I think AI tools used by the US government running through the blockchain of stablecoin issuers will rid the world of criminals using blockchain for illicit activity," Lutnick said.
Lawmakers sought additional detail on how audits and compliance would be enforced and asked him to propose reforms for secondary markets where tokens change hands after initial issuance. Senators said they expect the department to coordinate with Treasury and financial regulators on crypto oversight if the nominee is confirmed.
