Well-known financial blog ZeroHedge reported that 12 states in the United States have discovered Chinese cryptocurrency mining operations, raising national security concerns. Most notably, the U.S. Department of Defense is conducting surveillance on Chinese Bitcoin mining facilities in Cheyenne, Wyoming, because the site is close to Microsoft data centers that provide critical support to the U.S. Department of Defense and store sensitive information.
Microsoft had expressed concerns about the Wyoming site in its 2022 report to the Committee on Foreign Investment in the United States (CFIUS), highlighting the possibility of China engaging in comprehensive intelligence gathering activities. U.S. officials are concerned that the mining operation may be able to conduct surveillance on Francis E. Warren Air Force Base, home to the 90th Missile Wing, the "Mighty Ninety," a mile from the Bitcoin mine.
The New York Times pointed out that China's Bitcoin mining operations may have other undisclosed mining facilities in operation. Some Chinese companies are often affiliated with larger parent companies and hide their true identities by using shell companies. They are often registered in the Cayman Islands and maintain a deceptive presence with a US nominal address. For example, the owner of a Wyoming Bitcoin mine was previously registered as a pork company in Manhattan, but registered in the Cayman Islands to conduct mining activities, which has raised concerns about China's involvement in comprehensive intelligence activities and risks to the US economic and national security.
Before 2021, most of the world's cryptocurrency mining operations were concentrated in China, and China's decision to ban cryptocurrency mining was mainly due to concerns about energy consumption and capital flight. These mining operations usually occupy a large amount of warehouse space, which is often converted from former factories. They choose their locations in search of affordable electricity, because cryptocurrency mining is energy-intensive and generates a lot of heat. Therefore, these facilities need spacious, well-ventilated areas equipped with fans to regulate the temperature.
It is worth noting that one of the main concerns on the Chinese side is the possibility of capital flight, especially during economic crises when Chinese citizens try to transfer wealth abroad by converting it into hard currency or investing in foreign markets. Until 2021, Bitcoin has served as a covert means for capital to exit the country.
After Beijing decided to ban such activities, the industry moved to other countries, including the United States. Unlike China, the U.S. government's main concerns are rooted in national security. Bitcoin mining facilities concentrate a large amount of computing power, which may provide opportunities for various activities, including cyber attacks. There are concerns that China may use these mining activities to obtain intellectual property, trade secrets or financial data without authorization, posing a significant economic risk to the United States.
In addition, the energy consumption of cryptocurrency mining has also raised concerns about the vulnerability of energy infrastructure. Bitcoin mining is known for its high energy consumption, which may put pressure on the US power grid. The intermittent high energy consumption characteristics of these mining activities may cause power grid outages, which has been identified as a potential threat by the state of Texas.
ZeroHedge also reported that China has a record of trying to exert influence by contacting lower-level government employees or city government officials. The country may also use these mining operations to manipulate the price dynamics of Bitcoin and other cryptocurrencies to seek economic advantages. Acquiring a large part of the Bitcoin mining network could allow China to influence transactions or undermine the stability of the network, potentially harming U.S. interests.
China also has a history of assisting Mexican drug cartels in money laundering, and Bitcoin could potentially facilitate these illicit financial activities. Additionally, cryptocurrencies offer a solution to the challenge of transferring proceeds from U.S. drug sales back to Mexican cartels. These Bitcoin mining operations are the latest in a string of Chinese businesses discovered in the United States that have raised national security concerns. However, the U.S. government’s response to such discoveries often takes weeks or months, and even when action is taken, it is often fragmented, causing such problems to persist.
However, it is important to emphasize that recent reports have refuted these views, and as mining operations in China have collapsed, the Bitcoin mining industry has thrived since its debut. First, Bitcoin mining has achieved "carbon neutrality", and the industry's carbon emissions have been greatly reduced through the use of renewable energy and energy efficiency improvements. This is a positive development that helps reduce the impact of Bitcoin mining on the environment.
Secondly, global Bitcoin mining power is overflowing to new mining centers outside the United States. Russia, the Middle East, Latin America, and Southeast Asia have all become emerging Bitcoin mining hotspots. This trend makes the distribution of global Bitcoin mining power more balanced and reduces over-reliance on a single region.
In addition, the active participation of listed and private mining companies in fund management and financing practices has supported the stable development of the industry. Some previously bankrupt mining companies have reorganized and re-emerged with more sound operating strategies. This shows that the Bitcoin mining industry is gradually maturing and learning lessons from past market disruptions.
Summarize
In conclusion, although the transfer of China's bitcoin mining business has aroused the concern of the US national security, the transfer and global competition of the bitcoin mining industry are inevitable, and miners will make strategic adjustments according to market conditions and interests. This transfer is not limited to China, and other countries are also actively participating in bitcoin mining activities.
For the U.S. government, in the face of changes and challenges in the Bitcoin mining industry, the government needs to adopt appropriate policies and regulatory measures to protect national interests. At the same time, it also needs to cooperate with other countries to ensure the sustainable development of the Bitcoin mining industry and the long-term interests of the country.
