US lawmakers have introduced the CLARITY Act to limit federal ties to China’s blockchain

United States Representatives Zach Nunn and Abigail Spanberger co-introduced the Creating Legal Accountability for Rogue Inventors and Technologies Act of 2023, or the Transparency Act of 2023. The law is intended to prevent federal government officials from doing business with Chinese blockchain companies.

The law prohibits government officials from using China's blockchain or cryptocurrency trading platforms. It also expressly prohibits US government officials from conducting transactions with iFinex, the parent company of USDT issuer Tether.

In addition to iFinex, the CLARITY Act prohibits authorities from conducting transactions with Spartan Network, Conflux Network and Red Date technology. In a statement Wednesday, lawmakers said the bill, if passed, would ensure the country's “foreign adversaries … have no backdoor access to critical national security information and the personal information of Americans.”

Tether is reportedly exposed to Chinese securities and other Chinese companies as early as 2023. On June 16, several news sources, including Bloomberg, revealed that the company previously held guarantees from Chinese state-owned companies. Bloomberg cited documents released by the New York Attorney General's office and emphasized that entities such as the Industrial and Commercial Bank of China, the China Construction Bank and the Agricultural Bank of China support Tether (USDT).

This revelation follows years of questioning and concern about the assets backing Tether's stablecoin.

Tether's stock includes large short-term loans to Chinese companies and large loans to cryptocurrency platform Celicious Network. Tether has previously denied any involvement with China's Evergrande Group debt, but has not disclosed its holdings of other Chinese funds.

Related: Tether Provides $610M in Debt Financing to Bitcoin Miner Northern Data

Additionally, the US Securities and Exchange Commission is closely monitoring Tether's operations. In September, a report suggested that the company had begun secretly issuing USDT stablecoin loans to customers, a year after it promised to stop issuing secured loans.

According to the bill's sponsors, the latest move underscores Washington's growing concerns about China's ties to the cryptocurrency sector.

Magazine: How to protect your crypto in a volatile market — Bitcoin OGs and experts weigh in.