US warns of possible sanctions against Chinese AI firms

US Treasury Secretary Scott Bessent has said Washington could impose sanctions on Chinese artificial intelligence companies if they engage in large-scale covert activities involving the misuse of AI technology.

In a post on X, Bessent warned that companies found to be violating intellectual property rights through AI-related practices could face punitive measures, Caliber.Az reports.

“We support open-source AI and the innovation it unlocks. But open source is not open season on American IP. 

When PRC firms conduct covert, industrial-scale distillation attacks that cross the line into IP theft, sanctions and Entity List designations will be on the table,” Bessent wrote.

We support open-source AI and the innovation it unlocks. But open source is not open season on American IP. When PRC firms conduct covert, industrial-scale distillation attacks that cross the line into IP theft, sanctions and Entity List designations will be on the table.

— Treasury Secretary Scott Bessent (@SecScottBessent) July 22, 2026

The US has been addressing concerns over Chinese AI firms using "distillation" — a technique where smaller models learn from outputs of advanced US systems like those from Anthropic and OpenAI — to rapidly advance their capabilities.

In April 2026, the White House Office of Science and Technology Policy, led by Michael Kratsios, issued a memo accusing Chinese entities of conducting deliberate, industrial-scale distillation campaigns involving proxy accounts and jailbreaking to extract proprietary AI knowledge.

This built on earlier complaints from US AI companies, including Anthropic's accusations against firms like Moonshot AI, DeepSeek, and MiniMax for large-scale extraction efforts using thousands of fraudulent accounts.

By Jeyhun Aghazada