American national security hawks, long wary of Chinese technology, have turned their sights towards a new target: bitcoin mining.

Chinese companies dominate the production of the specialized bitcoin mining computers, capable of performing trillions of calculations per second, day and night. The sector’s three largest firms, two of which are based in China and the third of which was founded there, control 99 percent of the global market, according to Cambridge University research. 

Their customers are individuals or companies who set up so-called bitcoin mines tasked with generating new amounts of the cryptocurrency, currently worth around $90,000. Firms founded in China, which banned crypto mining in 2021, are increasingly active in creating and operating such mines in the United States. 

The non-stop calculations performed by bitcoin mining machines make the process highly energy intensive, however: electricity demand from crypto mining represents between 0.6 and 2.3 percent of all U.S. electricity consumption, the U.S. Energy Information Administration estimated last year — the equivalent of powering 3 to 6 million homes. 

Politicians and federal agencies are now probing whether Chinese-made bitcoin mining machines and Chinese-operated mines could be used to target the U.S. power grid, or for spycraft. 

The Republican-led Senate Intelligence Committee said in a July report that Chinese-owned mines “pose a danger to national security” by giving China “an opportunity to pursue a full suite of intelligence collection activities.” The Department of Homeland Security has meanwhile been looking into Bitmain, the Chinese industry leader, according to two people familiar with the situation, although it is unclear what the scope of any investigation is. One of the people said the probe is being led by the Department of Defense and that the DHS is playing a supporting role.

The Pentagon referred questions to the Department of Homeland Security, which did not respond to a request for comment. In a statement to The Wire, Bitmain said it has “never received any information related to the alleged DHS investigation” and that even if it exists, the company’s products “stand up to full scrutiny.” Bitmain “strictly complies with all applicable laws and regulations in every country and region of operation,” it added.

The scrutiny raises questions of whether China’s role in the bitcoin mining industry could indeed threaten American infrastructure. The hawks’ fear is based on the energy draw of bitcoin mining.

Take Texas, which hosts more bitcoin mines than any other state. Crypto mines there have a total capacity of 2,717 megawatts of electricity, representing more than 3 percent of peak demand, according to the state comptroller’s office. The state’s grid operator, the Electric Reliability Council of Texas (ERCOT), estimates that one megawatt can power 200 homes, implying that the state’s bitcoin mines have the potential to use as much energy as 543,400 households — more than in the entire city of Dallas. ERCOT projects that the peak draw of these mines could grow six-fold by 2030, the comptroller’s office has said.

ERCOT already pays bitcoin mining firms to power down their mining machines at warehouses known as data centers during periods when the grid is strained. During a heat wave in 2023, it acknowledged that if crypto mines had not powered down on one particularly hot day, it “would have been forced into emergency operations.”

National security hawks argue that it is dangerous for U.S. grid operators to rely on such co-operation from crypto miners: firstly, because they mostly use Chinese-made equipment, and secondly because several of the miners are now Chinese-owned or have links to China.

We should not panic our way into a policy that needlessly damages American miners, American energy projects, and American jobs based on unproven allegations.

Perianne Boring, founder and chairperson of the Digital Chamber, a trade association representing the crypto industry

“There is a whole archipelago of Chinese-run crypto data centers in America that have very unique abilities to stress and sabotage the power grid,” says David Feith, a former national security official in the Trump administration. “It’s a real standout problem.”

In September, for example, Congressman Zach Nunn (R-IA), requested that a national security committee chaired by Treasury Secretary Scott Bessent review a company called Cango, an auto financing platform founded in Shanghai 15 years ago, which entered the bitcoin mining industry last autumn after acquiring $256 million worth of Bitmain-made equipment. 

In August, Cango became the third-largest bitcoin mining company in the world by hashrate, a measure of computing power, according to an analysis of securities filings by industry publication TheMinerMag. That same month, the company bought a 50 megawatt mining facility in Georgia for $19.5 million; it also moved its headquarters to Dallas from Hong Kong in November.

Cango said that it does not “own or operate critical energy infrastructure” and that it is not “not owned, controlled, or directed by any government entity.” It said it plans to expand in the U.S. and globally.

To be sure, critics of Chinese bitcoin mining companies have not offered any evidence they are planning any kind of attack on U.S. power grids, or explained how any such attack could be co-ordinated and by whom. And while bitcoin miners’ operations can collectively impact on power supply in relatively extreme circumstances in states such as Texas, not all of those miners have connections with China. 

“Currently, it’s not in [Chinese companies’] best interest to do something nefarious,” says Anita Nikolich, a professor at the University of Illinois who has studied the security of bitcoin mining. “It’s in their interest to get in as many places as possible and either mine Bitcoin or sell machines.” 

Still, she worries that the proliferation of Chinese-owned machines and mines could eventually leave the power grid vulnerable, especially as the U.S. government accuses Chinese state-sponsored hackers of targeting other critical infrastructure. “This is a long game,” she says.

Industry observers are meanwhile skeptical that Chinese bitcoin mining interests could be engaged in spying, as bitcoin mining machines aren’t capable of collecting data, unlike other Chinese telecoms equipment such as drones or robots.

“A bitcoin mining machine’s only job is mining bitcoin,” says Nishant Sharma, founder of consultancy Blocksbridge. “It doesn’t know anything about its owner. It doesn’t have any confidential information about anybody, or store any of that information.” 

Ethan Vera, chief operating officer of Luxor Tech, a firm that provides software and services to bitcoin mining companies, says his team has taken Bitmain and other manufacturers’ equipment apart during its research and development process. It found that the machines “cannot be used for any espionage in their standard form.”

For its part, the U.S. bitcoin mining industry does not want to see President Trump — who has vowed to promote crypto and whose sons’ have invested in a firm with contractual ties to Bitmain — go after its suppliers. 

“We should not panic our way into a policy that needlessly damages American miners, American energy projects, and American jobs based on unproven allegations,” says Perianne Boring, founder and chairperson of the Digital Chamber, a trade association representing the crypto industry. 

A Trump administration official said addressing concerns such as those around Bitmain “always involves consulting and leveraging the expertise of industry.”

One such allegation, made by the Senate Intelligence Committee, is that Bitmain has “ties to the CCP,” though it did not specify those links. The company is now ultimately controlled by its co-founder Zhan Ketuan, according to a November securities filing by BitFuFu, a Nasdaq-listed mining firm in which Bitmain has invested. WireScreen shows that, through holding companies, Zhan is also the largest individual shareholder in chip designer Sophgo, a firm the U.S. blacklisted in January for posing a risk of diverting advanced chips to sanctioned Chinese telecoms giant Huawei.

To some former U.S. officials, these ties are cause for additional skepticism. “I view the national security risk as bigger than just the equipment that Bitmain supplies,” says Daniel Remler, who worked on technology issues at the State Department until this summer. 

There is a whole archipelago of Chinese-run crypto data centers in America that have very unique abilities to stress and sabotage the power grid. It’s a real standout problem.

David Feith, a former national security official in the Trump administration

“Sophgo was a main funnel for hundreds of thousands of chips to go from [Taiwanese chipmaker] TSMC to Huawei last year,” he adds.“[Bitmain could be] pursuing or exploring other avenues to assist China’s chip indigenization effort and circumvention of U.S. export controls.”

The Sophgo episode should have been a wake-up call about Bitmain, agrees Feith, the former Trump official. “It’s shocking that it wasn’t.”

Bitmain has rejected any “business overlap” with Sophgo. It said that allegations that Zhan is the largest individual shareholder in Sophgo are “false and groundless” and denied any ties to the CCP.  Huawei and Sophgo have also denied doing business with one another.

Nikolich, at the University of Illinois, says taking action against Bitmain is difficult because of how entrenched it is in the U.S. market, but that a first step could be requiring independent audits of bitcoin mining equipment for any cybersecurity risks. “That’s the best the U.S. can do right now,” she says.

Indeed, Chinese manufacturers are the “chokepoint for the hardware that makes the entire U.S. mining industry possible,” adds Digital Chamber’s Boring. “Any serious conversation about U.S. bitcoin strategy…has to grapple with that dependency.”

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