U.S. Bill Proposes Outlawing Government Use of China-Made Blockchains and Tether's USDT

U.S. lawmakers introduced a bill on Wednesday barring federal government officials from doing business with China-based blockchain firms, marking Washington's latest show of suspicion toward Chinese ties in the cryptocurrency industry, according to a statement from the sponsors.

The bill also explicitly blocks U.S. government officials from transacting with iFinex, the parent company of Tether, the issuer of the world's largest stablecoin, USDT.

The Creating Legal Accountability for Rogue Innovators and Technology (CLARITY) Act, co-led by U.S. Representatives Zach Nunn (R-Iowa) and Abigail Spanberger (D-Va.), would outlaw government officials from transacting with Chinese crypto companies, in addition to cutting off government employees' use of China-based blockchains, or the networks that undergird crypto trading platforms.

Neither of the bill's authors is among U.S. House of Representatives leadership or holds prominent positions on committees. Other, more senior lawmakers are already pressing a number of crypto bills, some of which also deal with security issues. A few of the efforts have the approval of full House committees and are further along in the process, so it's unlikely a new measure will jump in front of them in line.

The aim of this latest legislation is to ensure the nation's "foreign adversaries … do not have a backdoor to access critical national security intelligence and Americans' private information," the lawmakers said in a statement.

"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," Nunn, a freshman member who joined the House this year, said on Wednesday.

The bill also bans officials from transacting with The Spartan Network, The Conflux Network, and Red Date Technology Co., the architect behind China's national blockchain project and its central bank digital currency (CBDC), or digital yuan.

Red Date responded to the bill, adding that the BSN Spartan Network was for traditional IT, not crypto. The firm also welcomed U.S. agencies to peruse their source code for any further details.

"The BSN Spartan Network is completely open source and we welcome agencies from the US or any government to review the source code and make their own conclusions about the technology.  The Singapore-based BSN Foundation, with members from the USA, Europe, and Asia, governs the Spartan Network, which is completely separate from the BSN Networks in Mainland China," the firm said in a statement.

The legislation also directs the U.S. Secretary of the Treasury, Secretary of State, and the Director of National Intelligence to develop a plan to "prevent the risks posed by China's and other foreign adversaries' development of [blockchain] technologies."

The proposed restrictions come after lawmakers this summer instituted a security-driven ban on government employees' use of TikTok, a popular social media app with Chinese roots. The push came after a former employee of TikTok parent company ByteDance alleged in court filings earlier this year that the Chinese Communist Party utilized a secret "backdoor" in its popular social media platform to monitor Hong Kong-based activists' locations and messages in 2018.

UPDATE (Nov. 9, 07:22 UTC): Adds response from Red Date in the eighth and ninth paragraph.