US vs. China in Crypto: Bipartisan Bill Aims to Ban China-Made Blockchains

The crypto world is buzzing with a significant development that could reshape the landscape of digital finance, especially when it comes to the ongoing tech rivalry between the US and China. Imagine a scenario where the US government completely cuts ties with blockchain technologies originating from China, particularly in the realm of cryptocurrency transactions. Sounds like a major shift, right? Well, that’s precisely what’s on the table with a new bipartisan bill introduced by US lawmakers.

Why is the US Concerned About China-Made Blockchains?

In recent times, we’ve seen increased scrutiny and caution from US regulatory bodies like the SEC regarding cryptocurrencies. This new bill takes it a step further, directly addressing concerns about national security and data privacy. The core issue? A growing distrust of Chinese influence and control within the digital currency space. Think of it as a new front in the digital cold war, with cryptocurrency at the heart of the battle.

The CLARITY Act: Decoding the New Bipartisan Bill

On November 8, 2023, Representatives Abigail Spanberger (D-VA) and Zach Nunn (R-Iowa) unveiled the Creating Legal Accountability for Rouge Innovators and Technology (CLARITY) Act. In simple terms, this bill aims to:

• Prohibit US government personnel and agencies from using China-based blockchain networks. This means no more transacting or interacting with these networks for official purposes.
• Restrict the use of cryptocurrency platforms developed by Chinese entities for tracking digital transactions. The focus is on preventing potential surveillance and data breaches.
• Ban the use of China-based blockchains for crypto trading activities involving government officials and enterprises. This extends to investment purposes and financial dealings.

This move is a clear signal of the US government’s intent to distance itself from Chinese-controlled blockchain infrastructure within the cryptocurrency domain.

Tether’s USDT in the Crosshairs: What Does This Mean?

The bill specifically names iFinex, the parent company of Tether, as a company of concern. Why is this significant? Because Tether is the issuer of USDT, the world’s largest stablecoin. The implications are huge:

• US government entities will be barred from transacting with USDT. This could impact how government agencies manage digital assets and potentially influence broader market sentiment towards USDT.
• Increased scrutiny on stablecoins: This bill highlights the growing regulatory focus on stablecoins and their potential risks, particularly concerning their backing and geographical origins.

This restriction on USDT transactions could be a major blow, considering USDT’s dominance in the crypto trading market.

Who are the Targeted Chinese Blockchain Networks?

The bill explicitly names several key players in China’s blockchain and digital currency ecosystem, including:

• The Spartan Network
• Red Date Technology Co.
• The Conflux Network

These entities are heavily involved in developing China’s digital currency, the digital Yuan (e-CNY), and other blockchain-based products. By targeting these networks, the US government is aiming to limit China’s technological footprint in the global crypto space.

Why Now? National Security Concerns Take Center Stage

Representative Zach Nunn articulated the core rationale behind the bill, stating:

“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.”

This statement underscores the underlying concern: the potential for China to access sensitive data and exert undue influence through its blockchain technology. In an era where data is the new oil, controlling blockchain infrastructure is seen as a strategic advantage.

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Are There Other Crypto Regulations Brewing in the US?

Yes, indeed! The CLARITY Act is not an isolated incident. It’s part of a broader wave of legislative efforts aimed at regulating the cryptocurrency industry in the US. Another notable development is the amendment proposed by Representative Tom Emmer.

Emmer’s Bill: Reining in the SEC?

Representative Tom Emmer, a senior member of the House, is pushing for reforms to the Securities and Exchange Commission’s (SEC) approach to cryptocurrency regulation. His bill seeks to:

• Limit the SEC’s perceived overreach in the crypto industry. Emmer argues against what he sees as regulatory abuse that stifles innovation.
• Encourage regulatory principles over solely legal action. The aim is to promote a more balanced and constructive approach to regulation.
• Address concerns about SEC Chair Gary Gensler’s leadership. Emmer’s statements suggest a lack of confidence in Gensler’s handling of crypto regulation.

Emmer argues that the SEC’s current approach is “crushing American innovation and capital formation.” His amendment reflects a growing sentiment within some parts of the US government that the SEC might be overzealous in its crypto enforcement actions.

The Bigger Picture: Data Security and National Interests

Ultimately, both the CLARITY Act and Emmer’s amendment, though addressing different aspects of crypto regulation, point to a unified concern: protecting US interests in the rapidly evolving digital asset space. The focus is on:

• Safeguarding national security intelligence.
• Protecting the private data of American citizens.
• Ensuring fair and balanced regulation of the crypto industry.

As the US navigates the complexities of cryptocurrency and blockchain technology, these legislative efforts signal a proactive approach to managing risks and maintaining its competitive edge in the global digital economy.

What’s Next?

The CLARITY Act and Emmer’s amendment are still in the early stages. They will need to go through the legislative process, facing potential debates and revisions. However, they clearly indicate a growing bipartisan consensus in the US to address the challenges and opportunities presented by cryptocurrencies, particularly in the context of geopolitical competition and national security.

Keep an eye on these developments, as they could significantly impact the future of crypto regulation, the US-China tech landscape, and the broader digital economy. The crypto world is watching closely to see how these bills unfold and what ripple effects they will create.