In a move reflecting concerns about potential security risks associated with Chinese blockchain companies, US Representatives Zach Nunn (R-IA) and Abigail Spanberger (D-VA) have introduced the bipartisan CLARITY-Creating Legal Accountability for Rogue Innovators and Technology-Act of 2023. The bipartisan legislation seeks to limit the federal government's ties with Chinese blockchain companies.
The law will ban federal government officials from conducting business with these companies and prohibit government employees from using the networks of Chinese blockchain or cryptocurrency trading platforms, including the state-controlled Blockchain-based Service Network (BSN). US government officials are explicitly forbidden from engaging in transactions with iFinex, USDT issuer Tether's parent company. In addition, the CLARITY Act will also prevent officials from conducting transactions with the Spartan Network, the Conflux Network, and Red Date Technology.

Why does it matter?

The CLARITY Act is part of a larger campaign to protect US digital dominance in the aftermath of Sino-American tensions. The introduction of the legislation is seen as a response to growing worries about possible security risks associated with Chinese blockchain companies. It seeks to bring legal clarity to the complex convergence of technology, innovation, and international relations, with a focus on Chinese blockchain networks. The lawmakers claim that the legislation if enacted, would guarantee that the US's 'foreign adversaries... do not have a backdoor to access critical national security intelligence and Americans' private information'.
The Act comes amid revelations about Tether's financial links with Chinese firms. According to recent reports, Tether's holdings included securities from state-owned Chinese corporations as well as major loans to Chinese firms. The disclosure of these ties, which Tether had not previously admitted, complicates discussions about the assets that underpin its stablecoin. The future of the CLARITY Act will be sealed in the next few months, revealing its influence on the complex landscape of international relations and disruptive technologies.