Across US, Chinese Bitcoin mines draw national security scrutiny
WHEN a company with Chinese origins broke ground last year on a crypto-mining operation in Cheyenne, Wyoming, a team at Microsoft that assesses national security threats sounded the alarm.
Not only was the site next door to a Microsoft data center that supported the Pentagon, but it was also about 1 mile away from an Air Force base that controlled nuclear-armed intercontinental ballistic missiles.
The location could allow the Chinese to “pursue full-spectrum intelligence collection operations,” the Microsoft team wrote in an August 2022 report to the Committee on Foreign Investment in the United States, a federal body that monitors threats posed by overseas investors.
Microsoft’s warning did not go unheeded. Speaking on the condition of anonymity, US government officials told The New York Times last week that they had been tracking the Wyoming operation for months. One official said that measures had been taken to mitigate potential intelligence collection but declined to elaborate. In addition, the mining company said it responded to queries from the federal investment committee.
The national security concerns about the Wyoming site, previously unreported, reflect a broader unease about a recent surge in Chinese bitcoin mines across the country.
Aside from intelligence-gathering worries, the mines, which are large warehouses or containers packed with specialized computers, put immense pressure on power grids. The computers typically run around the clock while “mining” for the digital coins, the most popular among the various cryptocurrencies.
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Brian Harrell, a former assistant secretary for infrastructure protection at the Department of Homeland Security during the Trump administration, said the operations could place “enormous stress” on the grid if the mines worked in concert to wreak havoc.
Possibilities include targeted blackouts and cyberattacks.
In at least 12 states – including Arkansas, Ohio, Oklahoma, Tennessee, Texas and Wyoming – the Times identified Chinese-owned or Chinese-operated bitcoin mines that together use as much energy as 1.5 million homes. At full capacity, the Cheyenne mine would require enough electricity to power 55,000 houses.
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Many of the mines are equipped with computers made by Bitmain, a Chinese company that has no apparent direct connection to Chinese authorities but, according to import records, has sent some shipments to the United States through a subsidiary located at a Communist Party site in southern China.
Since bitcoin mining was banned in China in May 2021 over concerns about energy usage and economic destabilization, Bitmain has shipped 15 times more equipment to the United States than it did in the previous five years combined, the records show. A recent presentation by the company claimed it controlled 90 per cent of the global market for the equipment.
Some of the US mining operations appear to be straightforward efforts by wealthy Chinese nationals to make money outside the purview of Chinese authorities. For others, the ownership is opaque, while several can be traced to the Chinese government.
Court documents show that the mine in Cheyenne is linked to five companies, all using the same office on Park Avenue in New York City. One of them is registered in the Cayman Islands and until last year was a Chinese pork-processing company. The Times did not find any links between the owners of the Cheyenne mine and the Chinese government or Communist Party.
“Microsoft has no direct indications of malicious activities by this entity,” Microsoft said in its 16-page report. “However, pending further discovery, we suggest the possibility that the computing power of an industrial-level crypto-mining operation, along with the presence of an unidentified number of Chinese nationals in direct proximity to Microsoft’s Data Center and one of three strategic-missile bases in the US, provides significant threat vectors.”
The new risks come amid a steep rise in bitcoin mining in the US. This year, a Times investigation found that operations were consuming about 4,000 megawatts – enough to power more than 3 million US households – and that more megawatts were continuously coming online.
The operations’ vast energy consumption, combined with their ability to turn on or off almost instantly, is unique among large power users. The combination allows many to participate in programs that pay them to shut down when a grid is under strain.
That flexibility can help keep the lights on, but it can also disrupt the delicate balance grids require.
Many mines also have digital connections with grid operators that could allow intrusions into critical systems.
In July, an official with the North American Electric Reliability, which oversees protection of the power grid, told Congress about the growing threat of Chinese cyberattacks.
The Chertoff Group, a prominent security advisory firm, has been approached by several “critical infrastructure providers” for advice about the risks posed by bitcoin miners, particularly those owned by the Chinese, said Ben Joelson, one of the firm’s security experts.
In many parts of the country, the frustration is palpable.
“We’re all worked up over TikTok, but nobody seems to be saying anything about these Chinese companies connecting to our grids,” said Bryan King, a Republican state senator in Arkansas whose district includes the city of Harrison, where a Chinese investment group has purchased land for a bitcoin mine. “It just doesn’t make sense.”
The influx of mining in Texas has already begun to affect the state grid, one of the most vulnerable in the country because it is unconnected to others outside the state.
The grid’s operator, the Electric Reliability Council of Texas, recently reported that bitcoin mines’ energy consumption and lack of transparency had resulted in forecasting errors. The mines can “magnify the severity of grid events,” impacting reliability, the company said.
One proposal to reduce this risk is to regulate how fast the mines can start or stop using energy.
Chinese cryptocurrency mines have quickly entrenched themselves in Texas and are learning to adapt to its politics.
One company, Poolin, set up by a Bitmain veteran, runs a pair of mines in West Texas that together can draw on as much as 600 megawatts of energy, enough to power nearly 500,000 US homes. The company’s founder, Kevin Pan, is a Chinese citizen who has celebrated the warm embrace he and his company have received in Texas.
At a company celebration last year, he was seen wearing a cowboy hat and challenging guests to a one-armed pushup contest.
“I feel so lucky we chose Texas,” Pan said. “We chose America.” NYTIMES
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