The Trump Insiders Who Shaped US Crypto Regulation That Benefitted Tether

**Anthony Cormier** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**SPEAKER_2** (0:10)
With today's signing, we're pushing even further into the exciting new frontier.

**Sarah Holder** (0:14)
This time last year, President Trump signed the Genius Act, the first federal cryptocurrency regulation in the US.

**SPEAKER_2** (0:22)
This could be perhaps the greatest revolution in financial technology since the birth of the Internet itself.

**Sarah Holder** (0:29)
The legislation created new regulations on stable coins, a type of cryptocurrency backed by commodities like gold, or more often, fiat currencies like the US dollar.
That backing is designed to ensure stable coins maintain a steady, stable value unlike other cryptocurrencies. Another feature, users can send their money across borders without having to deal with the fees, regulation, and scrutiny of banks. That's made stable coins popular with all kinds of people, including criminals, terrorists, and sanctions evaders, a problem the Genius Act sought to address. But the idea of regulation set off alarm bells within the stable coin industry, including at Tether.

**Anthony Cormier** (1:16)
Tether is the most dominant force in stable coins, and one of the biggest overall crypto companies in the world. We think that they control about 60 percent of the stable coin market, that's Bloomberg Senior Investigative Reporter, Anthony Cormier.

**Sarah Holder** (1:32)
Tether's main product is a stable coin called USDT that's pegged to the US dollar. There's currently more than $180 billion worth in circulation.
And for every USDT out there, Tether is supposed to hold one US dollar in reserve. It can invest those dollars and hang on to the profits. And that simple idea has turned Tether into a giant.

**Anthony Cormier** (1:57)
They grow year by year. They're exponentially larger than their nearest competitor.

**Sarah Holder** (2:03)
But when lawmakers started calling for more oversight of stable coins, the company was concerned that US regulation could threaten that growth. Or worse.

**David Kocieniewski** (2:12)
Tether's CEO said he thought that the US could flick a switch and shut them down.

**Sarah Holder** (2:17)
Bloomberg senior investigative reporter David Kocieniewski.

**David Kocieniewski** (2:20)
There was pressure from US lawmakers and US law enforcement to see whether they were doing enough due diligence and enough anti-money laundering. It was kind of an existential moment for them.

**Sarah Holder** (2:30)
But in the end, the version of the genius act that Congress passed last summer contained provisions that benefited Tether.

**SPEAKER_2** (2:37)
I also want to recognize some of the countless industry leaders here today, including Brian Armstrong of Coinbase.

**Sarah Holder** (2:45)
In fact, Tether's CEO, Paolo Arduino, even attended the bill's signing.

**SPEAKER_2** (2:50)
Paolo Arduino of Tether.

**David Kocieniewski** (2:54)
Paolo, Paolo, thank you.

**Sarah Holder** (2:56)
So how did Tether go from fearing stablecoin regulation to supporting the genius act? A new Bloomberg News investigation reveals the story behind that shift.

**Anthony Cormier** (3:07)
We found that two of the president's key advisors, Commerce Secretary Howard Lutnick and crypto advisor Bo Hines, were influential in shaping the way that Bill turned out both before and after Trump took office.

**Sarah Holder** (3:24)
And both of those men ended up having close ties, not only to Trump, but to Tether.
I'm Sarah Holder and this is the Big Take from Bloomberg News. Today on the show, the inside story behind the Genius Act, and how Trump administration officials who wound up with close financial ties to Tether helped shape crypto regulation to the company's benefit.
Way back in 2021, long before there was a Genius Act, Tether was a hugely profitable company with an image problem. That year, federal regulators and New York State brought claims against Tether and a related crypto exchange, alleging that Tether had misled investors about their reserves. Tether and the exchange ended up paying more than $60 million to settle those claims. Tether never acknowledged any wrongdoing in the settlements, but questions about the company's assets persisted. So the company enlisted Cantor Fitzgerald, a New York financial firm, to manage the company's reserves. At the time, Howard Lutnick was Cantor Fitzgerald's CEO.

**Anthony Cormier** (4:39)
Howard Lutnick is a long-time financier.
He took over and was in charge of the firm during 9-11, when his office building was in the World Trade Center and they lost scores of employees. They are a very big but not tremendously sized financial institution. But what they offered to Tether was the ability to buy treasury bonds, which is one of the core ways you can back up or reserve your stable coins. They're very liquid, you can trade them very easily. It's essentially like having cash.

**Sarah Holder** (5:14)
In January 2024, Lutnick vouched for Tether's reserves on Bloomberg TV.

**David Kocieniewski** (5:19)
There's always been a lot of talk, do they have it or not? So I'm with you guys saying, we've seen it and they have it.