Howard Lutnick, the CEO of Cantor Fitzgerald and a recent appointee to oversee the US Commerce Department, has emerged as a vocal advocate for Tether, a company central to one of the most significant crypto assets globally. Yet, within the realm of cryptocurrency—a financial ecosystem notorious for hosting some of the century's most substantial frauds—Tether stands out as an enigmatic entity, perpetually under the microscope of investor scrutiny regarding its operations. It operates as an unregulated offshore financial institution, serving as a cornerstone of the $3 trillion cryptocurrency industry. In essence, Tether functions by exchanging traditional currency for digital tokens, known as tether (lowercase-T), which act as a stable digital representation of the US dollar within the cryptocurrency market. These tether tokens are classified as stablecoins, designed to maintain a consistent value amidst the volatility of other cryptocurrencies like bitcoin and ether.

Despite their designation as cryptocurrencies, they are, in reality, an inefficient medium for purchasing goods and services. The company behind the tether token, Tether Ltd., was established a decade ago by Brock Pierce, a former child star known for his role in "The Mighty Ducks," and Giancarlo Devasini, a former plastic surgeon. Today, Tether has become a dominant player in the cryptocurrency market, with a daily trading volume that surpasses even that of bitcoin, the most widely recognized cryptocurrency. Like many entities in this largely unregulated space, Tether has faced regulatory and legal scrutiny.

The Wall Street Journal recently reported that federal authorities are investigating Tether for potential breaches of sanctions and anti-money-laundering regulations. According to unnamed sources, prosecutors from the Manhattan US attorney's office are probing whether Tether has been utilized by third parties to finance illicit activities such as drug trafficking, terrorism, and hacking. Concurrently, the Treasury Department is reportedly contemplating sanctions against Tether due to its use by nefarious actors, including Hamas and Russian arms dealers, who rely on its stablecoin. Tether has vehemently denied any involvement in criminal activities, describing such allegations as "outrageous" and asserting that it actively collaborates with law enforcement to combat illegal activities. The CEO of Tether has also categorically denied the allegations in a statement.

Tether's history is not without its share of public relations crises. For years, there has been speculation about the location of Tether's billions in reserves. In 2021, Tether settled with New York authorities for $61 million over allegations that it misrepresented the assets backing its stablecoin, a significant violation that Tether attributed to a communication oversight. Doubts about Tether's reserves persist within the cryptocurrency community. The company essentially operates as an unregulated offshore bank, free from the reserve requirements and regulations that govern traditional banks.

Lutnick, a proponent of Bitcoin and whose Wall Street firm manages Tether's Treasury bill holdings, has been a staunch defender of the stablecoin issuer. In an interview with Bloomberg on the sidelines of the World Economic Forum in Davos in January, Lutnick stated, "There's always been a lot of talk—'do they have it or not'—so I'm...saying, we've seen it and they have it."

It's important to note that Lutnick's role at the Commerce Department, where he would primarily be responsible for implementing President-elect Donald Trump's tariff and trade policies, affords him less influence over cryptocurrency policies than a position at the Treasury would. However, Lutnick is not the only cryptocurrency enthusiast within Trump's circle, and the president-elect himself has had a change of heart regarding the sector, which he once dismissed as a scam. This shift coincided with cryptocurrency billionaires contributing millions of dollars to his re-election campaign.

The departure of crypto opponents, such as Securities and Exchange Commission Chair Gary Gensler, who aggressively opposed the industry's expansion in the United States, is more significant news for cryptocurrency enthusiasts than the arrival of new supporters. Since the US election, bitcoin, a leading indicator of the crypto market, has surged by over 30%, fueled by expectations that the regulatory constraints perceived by the industry are coming to an end. Faryar Shirzad, chief policy officer at Coinbase, expressed optimism last week, stating, "All of us who are in the industry have a lot of conviction that the technology will be the foundation of the financial architecture of the future. It's just been the hostility from the regulators that have held them back."