U.S. Representatives Zach Nunn and Abigail Spanberger have jointly introduced the Creating Legal Accountability for Rogue Innovators and Technology (CLARITY) Act. The legislation aims to prohibit federal government officials from conducting business with Chinese blockchain companies.

The Act would ban government employees from using the underlying networks of Chinese blockchain or cryptocurrency trading platforms. Furthermore, it would explicitly forbid U.S. government officials from engaging in transactions with iFinex, the parent company of USDT issuer Tether.

In addition to iFinex, the CLARITY Act would prohibit officials from conducting transactions with The Spartan Network, The Conflux Network, and Red Date Technology. In a statement on Wednesday, the lawmakers said that the legislation, if passed, would ensure the nation’s “foreign adversaries … do not have a backdoor to access critical national security intelligence and Americans’ private information”.

Tether was reported to have been exposed to Chinese securities and other Chinese firms earlier this year. On June 16, several news sources, including Bloomberg, disclosed that the company previously held securities from Chinese state-owned firms. Bloomberg referred to documents released by New York’s Attorney General (NYAG) and emphasized that deposits from entities like the Industrial and Commercial Bank of China, China Construction Bank, and Agricultural Bank of China formerly supported USDT.

This revelation follows years of inquiry and concern about the assets supporting Tether’s stablecoin.

Tether’s reserves encompassed substantial short-term loans to Chinese firms and a significant loan to the cryptocurrency platform Celsius Network. Tether had previously denied any involvement with the debt of China’s troubled Evergrande Group but had not revealed its holdings of other Chinese securities.

Related: Tether issues $610M debt financing to Bitcoin miner Northern Data

Further, the U.S. SEC is also closely monitoring Tether’s operations. In September, a report suggested that the company secretly began offering USDT stablecoin loans to customers a year after Tether Holdings pledged to cease providing secured loans.

As the bill’s sponsors state, the latest move underscores Washington’s growing concerns about Chinese connections within the cryptocurrency sector.

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