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I hope you are all well and had an excellent week, welcome to CryptoGod-1’s blog on all things crypto. In this post I will be looking at the new bill introduced on Wednesday by U.S. lawmakers which would stop the federal government officials from doing business with China-based blockchain firms. This would extend as far as iFinex, the parent company of Tether, who issue the stable coin USDT.
The CLARITY Act
A new bipartisan bill was introduced on Wednesday the 8th of November 2023 which would prohibit any U.S. government officials from transacting with Chinese based crypto firms. This would included but not be limited to China-based blockchain networks, China-based cryptocurrency companies, China’s digital yuan, and of course the world’s largest stable coin, Tether (USDT).
The bill was introduced by U.S. Representatives Zach Nunn (R-IA) and Abigail Spanberger (D-VA) with the name Creating Legal Accountability for Rogue Innovators and Technology (CLARITY). This bill will aim to ensure government officials’ cryptocurrency transactions and use of blockchain technologies are regulated. According to the bills creators, it would
"ensure that the country’s foreign adversaries… do not have a backdoor to access critical security intelligence and Americans’ private information.”
The bill specifically blocks U.S. government officials from transacting with iFinex, the parent company of Tether. The bill would also 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.
The bill comes after it had been recently reported that China's position as the prominent player in the cryptocurrency market means they have generated more revenue for the world’s largest crypto firms than any other nation. The representatives therefore fell that China’s blockchain networks and those of “unregulated, self-proclaimed ‘supra-national’ companies” could “pose risks” to the U.S. national security and foreign policy interests. One of the main recipients of this revenue from China has been Binance, as users from China traded $90 billion of cryptocurrency, making up 20% of Binance’s total crypto volume.
Neither of the bill's authors is among U.S. House of Representatives leadership or holds prominent positions on committees, but they have pushed ahead with their bill even though more senior lawmakers are already pressing a number of crypto bills. Some of those also deal with security issues and while some of the efforts have the approval of full House committees and are further along in the process it is highly unlikely this new bill will be pushed ahead of any others in the queue.
Spanberger and Nunn were quick to share their opinion, with Nunn noting:
“Within the next decade, every American will have sensitive, private data stored using blockchain technology. China’s heavy investment in this infrastructure poses a colossal national security and data privacy problem.”
Spanberger also added his opinion, stating:
“As a former CIA case officer, I understand that the Chinese Communist Party’s investment in a state-controlled blockchain network poses significant risks to U.S. data security.”
The China Ban
If passed and made into law, the bill would mean a ban on a variety of companies from China. Officials would be banned from transacting with The Spartan Network, The Conflux Network, and Red Date Technology Co. With Red Date Technology having worked as the architect behind China's national blockchain project and its central bank digital currency (CBDC), or digital yuan, the company was quick to issue a response to the bill:
"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."
Red Date also added that the BSN Spartan Network was for traditional IT, not crypto, while also welcoming U.S. agencies to peruse their source code for any further details.
With American lawmakers looking to counteract any risks posed by China in the crypto and blockchain space, it is important to note that China’s struggling economy could have serious knock-on effects on the crypto industry. A Stanford University report also looked at the connection between BSN and China’s CBDC, the digital yuan. The Chinese government have plans to develop their own global universal digital payments network (UDPN) which would enable a standardized digital currency transfer method and payment procedure for any information system. It is believed this would support CBDC issued by various countries, presumably including the digital yuan.
As part of the bill, the representatives also direct the U.S. Secretary of the Treasury, Secretary of State, and the Director of National Intelligence to push ahead with the development of a national plan to counteract and prevent any risks posed by China's and other foreign adversaries' development of blockchain technologies.
Back in 2022 President Joe Biden approved a bill banning the federal government employees’ use of TikTok. This app was also banned in 34 of the 50 states targeting state government agencies, employees, and contractors. The ban on TikTok 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.
Have a great day,
CryptoGod-1.
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