U.S. Representatives Zach Nunn and Abigail Spanberger jointly introduced the Creating Legal Accountability for Rogue Innovators and Technology (CLARITY) Act. The legislation aims to prohibit federal government officials from doing business with Chinese blockchain companies.
The law would prohibit government employees from using the underlying networks of Chinese blockchain or cryptocurrency trading platforms. Additionally, it would explicitly prohibit U.S. government officials from engaging in transactions with iFinex, the parent company of USDT issuer Tether.
In addition to iFinex, the CLARITY Act would prohibit public officials from transacting with The Spartan Network, The Conflux Network, and Red Date Technology. In a statement released Wednesday, lawmakers said the legislation, if passed, would ensure that the country’s “foreign adversaries… will not have a back door to access critical national security intelligence and private information of Americans “.
Tether was reportedly exposed to Chinese securities and other Chinese companies earlier this year. On June 16, several news sources, including Bloomberg, revealed that the company previously held securities in Chinese state-owned enterprises. Bloomberg referred to documents released by the New York Attorney General (NYAG) and pointed out that deposits from entities such as the Industrial and Commercial Bank of China, the Construction Bank of China and the Agricultural Bank of China supported previously USDT.
This revelation follows years of investigation and concern over the assets backing Tether’s stablecoin.
Tether’s reserves included large short-term loans to Chinese companies and a large loan to cryptocurrency platform Celsius Network. Tether had previously denied any involvement in the debt of the troubled Chinese group Evergrande, but had not revealed its holdings of other Chinese securities.
Related: Tether issues $610 million debt financing to Bitcoin miner Northern Data
In addition, the US SEC is also closely monitoring Tether’s operations. In September, a report suggested that the company had secretly started offering USDT stablecoin loans to its customers a year after Tether Holdings pledged to stop providing collateralized loans.
As the bill’s authors argue, this latest move underscores Washington’s growing concerns about Chinese connections in the cryptocurrency sector.
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