U.S. Lawmakers Introduce Bill to Block Transactions with Chinese Blockchain Firms

Concerned about the security and privacy consequences of such engagements in the cryptocurrency business, U.S. legislators have presented a measure that seeks to ban federal government personnel from transacting with blockchain companies located in China. This is a big development.

Additionally, the measure, dubbed the Creating Legal Accountability for Rogue Innovators and Technology (CLARITY) Act, expressly prohibits government personnel in the United States from transacting with iFinex, the parent business of Tether, the firm that issues USDT, the largest stablecoin in the world. This move highlights the mounting concern in Washington over the connections between Chinese companies and the bitcoin industry.

Key Provisions of the CLARITY Act

The CLARITY Act, co-authored by U.S. Representatives Zach Nunn (R-Iowa) and Abigail Spanberger (D-Va.), aims to restrict government workers’ use of China-based blockchains that facilitate cryptocurrency trading platforms in addition to outlawing government officials’ interactions with Chinese cryptocurrency companies.

The U.S. lawmakers emphasized that the legislation’s primary objective is to protect the nation’s national security intelligence and the privacy of American citizens by ensuring that “foreign adversaries do not have a backdoor to access critical national security intelligence and Americans’ private information.”

As the adoption of blockchain technology continues to expand, the bill underscores the potential national security and data privacy risks posed by China’s extensive investments in this infrastructure. Representative Zach Nunn, who recently joined the House, stated that “within the next decade, every American will have sensitive, private data stored using blockchain technology, so China’s heavy investment in this infrastructure poses a colossal national security and data privacy problem.”

In addition to iFinex and Tether, the bill prohibits officials from transacting with The Conflux Network, The Spartan Network, and Red Date Technology Co., the company in charge of China’s national blockchain initiative and the country’s digital yuan, or central bank digital currency (CBDC).

Furthermore, the legislation requires the Secretary of State, the Secretary of the Treasury, and the Director of National Intelligence to create a comprehensive plan to reduce the risks associated with China and other foreign adversaries developing blockchain technologies.

This legislative action comes after a prior security-driven prohibition earlier this summer on the use of TikTok, a well-known social media app with Chinese origins, by government personnel. It began in response to claims that in 2018, the Chinese Communist Party had surreptitiously monitored activists’ activity on the platform by use of a hidden “backdoor”.