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US Senator Introduces Bill That Could Criminalize Downloading DeepSeek AI

by Darius Ngetich
Feb 5, 2025 - 6:30 pm
in Blockchain
Senator Josh Hawley speaking at a press conference about AI security and the proposed DeepSeek AI ban.

KOFIA Chief For Regulated Crypto Products

The South Korean Financial Investment Association, KOFIA, is pushing for approval of cryptocurrency exchange-traded funds in 2025, amid growing demand from aging investors. The head of KOFIA, Seo Yoo-seok, mentioned that direct crypto investment poses risks and therefore a regulated ETF might be safer.

Aging Investors Driving Demand

Seo’s comments reveal a deep change in crypto demographics. Local reports indicate that South Korea has seen a 450% surge in new crypto exchange registrations, and nearly half of the applicants were 40 years and above. Many older investors are looking to get exposure to digital assets, but they want to do it through regulated options rather than owning cryptocurrencies directly.

Regulatory Challenges Remain

Despite this demand, the South Korean Financial Services Commission doesn’t consider cryptocurrencies as an underlying asset under the Capital Markets Act. The mentioned restriction hasn’t allowed crypto-backed ETFs to be approved and raised challenges for financial institutions that are willing to offer such products. Bitcoin and Ethereum ETFs are likely to be delayed to come into existence without legislative amendments.

Government Re-Thinks Crypto Policies

In October 2024, South Korea launched a virtual asset committee to reconsider corporate crypto trading and ETFs. Recent discussions indicate that reviews on corporate trading accounts are almost complete, which could be a green light for future ETF approvals. If the regulators make a U-turn, institutional participation in the crypto market could increase manifold.

Crypto Market and Regulation in South Korea

South Korea is one of the world’s most active cryptocurrency markets. Even its local currency, in early 2024, overtook the US dollar as the most traded fiat against crypto. But with strict anUS Senator Introduces Bill That Could Criminalize Downloading DeepSeek AI

Severe Penalties Proposed for AI Tech Imports

US Senator Josh Hawley, R-MO, introduced a bill entitled the Decoupling America’s Artificial Intelligence Capabilities from China Act aimed at restricting AI technology exchange with China. Although it does not mention DeepSeek, a Chinese AI chatbot, the bill wants to contain potential security risks brought about by foreign AI systems.

The bill, if passed, would ban individuals and companies from downloading DeepSeek AI; it would also bar the US and China from collaborating on any research related to AI. According to Hawley, it is a matter of national security to limit China’s access to US-based AI development.

Severe Fines Imposed on Individuals and Companies

The bill contains severe punishments for offenders:

  • Individuals may face fines up to $1 million.
  • Companies could be fined as much as $100 million.
  • Offenders can be imprisoned for up to 20 years.

Violators will be deprived of any government contracts, grants, and federal benefits.

Hawley emphasized that the money invested in Chinese AI has been utilized to undermine the US’s position till date, referring to which he said,
“America cannot afford to empower our greatest adversary at the expense of our own strength. Ensuring American economic superiority means cutting China off from American ingenuity.”

Impact on AI Research and Development

Apart from barring the downloading of DeepSeek AI, the bill would:

Critics Say Bill Would “Kill” Open-Source AI

  • bar investments by US firms in Chinese development of AI.
  • ban collaborations between US researchers and Chinese companies that develop or work on the creation of AI.
  • bar export-imports regarding AI technologies and related components across US and Chinese borders.

DeepSeek AI was already in controversy for data-privacy issues since Italy banned the app. Several regulators from around the world began to scrutinize how the chatbot collects personal data and information.

While the bill intends to protect US interests, experts in AI warn it could damage research. Ben Brooks, a fellow at Harvard AI Research, described the bill as the “most aggressive legislative action on AI”, saying that it would grossly impact open-source AI development in the US.

Andy Ayrey, founder of the Truth Terminal chatbot, also wondered whether the move to ban AI collaboration would hurt China or just slow the West. He said that AI models should be open-sourced to proliferate democratic values to steer AI development around the world.

If passed, this could be game-changing for US-China AI relations and have deeper implications for the future of AI innovation, investments, and international research. “The AML laws make it mandatory for exchanges to tie up with local banks for crypto-to-fiat services, which curbs institutional participation.

Opening a crypto-to-fiat account requires investors to register a real-name account with a local bank. This rule effectively shut the door on corporate entities looking to trade cryptocurrencies. Only five exchanges in South Korea are compliant with banking requirements to offer fiat on-ramps, meaning access to the market for corporations is restricted.

If KOFIA successfully introduces Bitcoin and Ethereum ETFs, that could give older investors a regulated alternative to direct crypto exposure, further legitimizing the industry within South Korea’s financial ecosystem.

Tags: BlockchainRegulationWeb3
Darius Ngetich

Darius Ngetich

Darius Ngetich is a blockchain, crypto, and gaming enthusiast. He is also an animator, VFX Artist, and Game Developer, specializing in computers with vast experience in programs like Blender, Unity, and Unreal Engine. My passions are creating games and informing others about the latest developments in crypto, blockchain, and gaming.

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