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Chinese Bitcoin Mining Operations Raise U.S. National Security Alarm

  • Chinese cryptocurrency mining facilities have been discovered near critical US sites, including a Pentagon-supported Microsoft data center and Warren Air Force Base.
  • The US is wary of potential surveillance and intelligence collection by China through these operations, as well as risks to the national energy infrastructure.
  • Concerns also include China's potential influence on bitcoin price dynamics and facilitating illicit financial activities like money laundering for Mexican drug cartels.

Chinese cryptocurrency mining operations have been discovered in 12 U.S. states, raising national security concerns, including Arkansas, Ohio, Oklahoma, Tennessee, Texas and most notably, as The Epoch Times' Antonio Graceffo details below, The Pentagon is overseeing surveillance of a Chinese bitcoin mining facility in Cheyenne, Wyoming.

This site is near a Microsoft data center that houses sensitive information, providing critical support to the Pentagon.

In a 2022 report submitted to the Committee on Foreign Investment in the United States (CFIUS), a federal entity responsible for monitoring foreign investments with potential national security implications, Microsoft expressed concerns regarding the Wyoming location, emphasizing the possibility of China engaging in comprehensive intelligence collection activities.

U.S. officials are apprehensive that this mining operation may be able to conduct surveillance on the Francis E. Warren Air Force Base, a mile away from the bitcoin mine. The base is home to the 90th Missile Wing, known as the “Mighty Ninety,” responsible for maintaining “Minuteman III intercontinental ballistic missiles (ICBMs) "on full alert 24 hours a day, 365 days a year."

The Wyoming-based mine uses computer hardware sourced from a company known as Bitmain, with some components originating from a location affiliated with the Chinese Communist Party (CCP). Following the 2021 ban on Bitcoin mining in China, shipments of Bitmain equipment to the United States surged fifteenfold. The New York Times identified Chinese bitcoin mining operations in a dozen states, and it is possible that additional undisclosed mining facilities are in operation.

Another Chinese bitcoin mining entity, YZY Capital Holdings, also acquired land near Warren Air Force Base. These Chinese firms are frequently affiliated with larger parent corporations, often concealed through shell companies, and tend to maintain a deceptive presence with a nominal address in the United States while being registered in the Cayman Islands. The corporate proprietor of the Wyoming Bitcoin mine was previously registered as a pork company located in Manhattan but registered in the Cayman Islands. Similarly, YZY Capital Holdings holds its registration in Manhattan and is owned by Chinese national Yuan Qian, who reportedly has ties to the CCP.

Prior to 2021, the majority of global cryptocurrency mining operations were concentrated in China. However, following Beijing’s decision to ban such activities, the industry shifted to other nations, including the United States. These mining operations often occupy extensive warehouse spaces, usually repurposed from former factories. Their choice of location is driven by the quest for affordable electricity, as cryptocurrency mining is energy-intensive and generates substantial heat. Therefore, these facilities require spacious, well-ventilated areas equipped with fans to regulate temperature.

Tourists walk on the dunes near a power plant in Xiangshawan Desert in Ordos of Inner Mongolia in this file photo. Bitcoin miners have enjoyed favorable electricity rates in places like Ordos for a long time. (Feng Li/Getty Images)

China’s decision to ban cryptocurrency mining was prompted by concerns related to excessive energy consumption and the inability to regulate the flow of currency out of the country.

Notably, one of Beijing’s primary concerns was the potential for capital flight, particularly during economic crises when Chinese citizens sought to move their wealth abroad by converting it into hard currency or investing it in foreign markets. Until 2021, bitcoin had served as a covert means for capital to exit the country. By banning private cryptocurrency, Beijing is eliminating competition for its own central bank digital currency (CBDC), over which it will have full control.

Beijing’s pursuit of cryptocurrency regulation aligns with its economic policies, whereas the U.S. government’s primary concern is rooted in national security. Bitcoin mining facilities concentrate substantial computing power within a single location, potentially opening the door to various activities, including cyberattacks. There are concerns that China may leverage these operations for the unauthorized acquisition of intellectual property, trade secrets, or financial data, posing significant economic risks to the United States.

Another concern pertains to the vulnerability of energy infrastructure. Bitcoin mining is notorious for its substantial energy consumption, potentially straining U.S. power grids. These mining operations’ capacity to intermittently consume vast amounts of energy can lead to grid disruptions, a threat identified by the state of Texas. The unearthing of undisclosed mining facilities could underscore weaknesses within the U.S. energy infrastructure, particularly when these operations are connected to the power grid without the necessary authorization.

Many of the Chinese mines are located in parts of the United States where there is little or no industry or places like Niagara Falls, where joblessness is high. Local governments have warmly welcomed these mining ventures in hopes of jumpstarting their local economies and job opportunities. However, this eagerness also presents opportunities for potential Chinese influence operations. The CCP has a track record of attempting to exert influence through engagement with lower-tier government employees or city and municipal officials.

The CCP might also be utilizing these mining operations to manipulate the price dynamics of bitcoin and other cryptocurrencies, seeking economic advantages. Acquiring a substantial portion of the bitcoin mining network could allow China to influence transactions or disrupt the network’s stability, potentially undermining U.S. interests. Moreover, the CCP has a history of assisting Mexican drug cartels in money laundering. Bitcoin could facilitate these illicit financial activities. Additionally, cryptocurrencies offer a solution to the challenge of transferring proceeds from drug sales in the United States back to Mexican cartels.

ThesebBitcoin mining operations represent the most recent additions to a series of Chinese businesses found in the United States that raise concerns for national security.

For example, in August, an unlicensed Chinese biolab was uncovered in California, where it was handling potentially lethal viruses and genetically altered mice.

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These incidents collectively underscore the risks associated with permitting Chinese companies to invest in the United States and highlight how the CCP may exploit our democratic freedoms.

Furthermore, the government’s response to such discoveries often takes weeks or months, and when it does act, the actions are often fragmented, allowing such issues to persist.

By Zerohedge.com

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