Chinese bitcoin mines in US spark national security concerns: NYT

Chinese bitcoin mines in the U.S. have sparked national security concerns, The New York Times reported, with one such operation located next to a Microsoft data center supporting the Pentagon and near an Air Force nuclear missile base in Cheyenne, Wyoming.

The locations could allow the Chinese to "pursue full-spectrum intelligence collection operations," the Microsoft team previously wrote to a U.S. government committee.

Anonymous U.S. government officials told the NYT they had been tracking the Wyoming facility for months, adding that measures had been taken to mitigate any potential intelligence threat.

A company linked to the Cheyenne mine, Bit Origin, told the NYT it had responded to queries from the U.S. federal committee. Li Jiaming, president of the pork processor turned bitcoin miner, said the site was chosen after securing an agreement from the local utility company to provide it with power, not due to the proximity of the Microsoft data center or the missile base.

Many of these mines were set up after China banned bitcoin mining in 2021. Several reportedly have ties to the Chinese Communist Party or state-owned entities concealed behind layers of shell companies, according to the NYT.

The Cheyenne site is not one of them. However, another Chinese company involved in bitcoin mining, YZY Capital Holdings, bought a separate plot of land near the Microsoft data center and is controlled by Yuan Qian, a Chinese businessman and Communist Party member, the NYT said.

The China connection

The NYT identified Chinese-owned or operated bitcoin mines in at least 12 states, including Arkansas, Ohio, Oklahoma, Tennessee, Texas and Wyoming.

Despite legislation restricting Chinese land ownership due to security concerns in several U.S. states, Texas has emerged as a particular hotspot for significant bitcoin mining operations with Chinese connections, the NYT said. The Lone Star Infrastructure Protection Act, signed by Gov. Greg Abbott in June 2021, prohibits businesses owned by foreign adversaries from accessing critical infrastructure. Yet, Chinese-tied bitcoin mining operations continue to thrive, incentivized by lucrative state incentives.

Former assistant secretary for infrastructure protection at the Department of Homeland Security, Brian Harrell, said the operations could place "enormous stress on the grid if the mines worked in concert to wreak havoc." The bitcoin mines are operating in a "gray area," Howard Gugel, VP at NERC, U.S. grid regulator, added.

A recent report from the Office of the Director of National Intelligence also warned that if a major conflict with the U.S. was imminent, China would "almost certainly consider undertaking aggressive cyber operations against U.S. homeland critical infrastructure."

Many facilities are equipped with bitcoin mining machines from the dominant Chinese manufacturer Bitmain. While Bitmain has no direct connection to Chinese authorities, the NYT said, some of its exports to the U.S. were channeled through a subsidiary, Hainan Bitmain Technologies, which lists its address at a Communist Party guesthouse in Hainan.

Since China’s 2021 ban, Bitmain has shipped 15 times more machines to the U.S. than in the previous five years combined, the NYT added.

Bitmain did not immediately return a request for comment from The Block.