- The US House of Representatives introduced a new bill, the CLARITY Act, aimed at limiting ties between US officials and major Chinese blockchain companies like Tether and Conflux.
- The bill reflects growing scrutiny of Tether’s reserves and connections to China, including loans to Chinese firms and deposits from Chinese banks that raise concerns about USDT backing.
- The legislation would prohibit US government dealings with Tether’s parent iFinex and several other major Chinese blockchain networks, citing security risks, but could impact crypto markets given their dominance.
The US House of Representatives has introduced a new bill aimed at limiting ties between US officials and Chinese blockchain companies. The proposed CLARITY Act would prohibit government dealings with major China-linked firms like Tether and Conflux.
Background on Tether’s China Ties
Tether, the issuer of the popular USDT stablecoin, has faced growing scrutiny over its reserves and connections to China. Earlier this year, Tether admitted to holding Chinese commercial paper, despite previously denying it had exposure to distressed developer Evergrande. The company also offered loans to Chinese firms and held deposits from major Chinese banks. These revelations have raised concerns that USDT reserves could be at risk if China experiences financial turmoil.
Details of the Legislation
The bipartisan CLARITY Act, proposed by Representatives Zach Nunn and Abigail Spanberger, would explicitly ban US officials from engaging in transactions with Tether’s parent company iFinex. It would also prohibit government dealings with several other major Chinese blockchain networks, including Conflux, Spartan, and Red Date Technology. The lawmakers said the act aims to ensure China does not gain backdoor access to sensitive US data and systems.
Broader China Crypto Crackdown
The proposed legislation reflects escalating efforts to limit China’s influence in the cryptocurrency industry. Earlier actions include sanctions on Chinese bitcoin miners and warnings from the SEC about investing in Chinese firms. However, completely severing ties with China-linked networks like Tether could prove challenging given their dominance in trading and settlement. The coming debate over the CLARITY Act will likely weigh security concerns against potential impacts on crypto markets.