US Lawmakers Propose CLARITY Act to Restrict Ties with Chinese Blockchain Entities

In a move reflecting increasing wariness of Chinese connections within the cryptocurrency sphere, U.S. lawmakers introduced the Creating Legal Accountability for Rogue Innovators and Technology (CLARITY) Act on Wednesday. Spearheaded by Representatives Zach Nunn and Abigail Spanberger, the bill not only forbids government officials from transactions with Chinese crypto companies but also restricts the use of China-based blockchains by government employees.

The legislation specifically names iFinex, the parent company of Tether, issuer of the world's largest stablecoin, USDT, as a target for the ban. The bill also extends its reach to entities like The Spartan Network, The Conflux Network, and Red Date Technology Co., the architect behind China's national blockchain project and its digital yuan.

Addressing concerns about potential backdoors for foreign adversaries, the lawmakers emphasized the need to secure critical national security intelligence and protect Americans' private information. Representative Nunn highlighted the significance of blockchain technology, stating that "every American will have sensitive, private data stored using blockchain technology" in the coming decade, intensifying the national security and data privacy dilemma posed by China's substantial investment in this infrastructure.

The bill's scope encompasses more than just financial transactions, targeting the networks that support crypto trading platforms. However, it faces competition from existing crypto bills championed by senior lawmakers, some already progressing through House committees.

In response to the proposed restrictions, Red Date Technology Co. clarified that the BSN Spartan Network, one of the named entities, serves traditional IT purposes rather than crypto. The firm invited U.S. agencies to review their open-source code for further details, asserting the separation of the Spartan Network from BSN Networks in Mainland China.

The CLARITY Act also mandates key figures, including the U.S. Secretary of the Treasury, Secretary of State, and the Director of National Intelligence, to formulate a plan addressing the risks associated with China's and other foreign adversaries' development of blockchain technologies. This legislative move follows a prior ban on government employees' use of the Chinese social media app TikTok, driven by security concerns and allegations of data monitoring by the Chinese Communist Party.