Statement: China is allowed to do crypto mining in the U.S.
MANCHESTER, N.H. — Addressing a forum of cryptocurrency enthusiasts, Republican 2024 presidential candidate and former Arkansas Gov. Asa Hutchinson said he wants the crypto industry to thrive — but with some regulation.
“I want them to have rules that can be followed, and Congress needs to act,” Hutchinson said Dec. 11 at a candidate forum sponsored by the U.S.-based advocacy group Stand with Crypto Alliance. “It makes no sense to me: If we’re trying to prohibit communist China from buying farmland in America, why are we allowing them to do crypto mining in the United States of America?”
All the GOP presidential primary candidates have made China a favorite talking point and say it has outsized influence on U.S. policy and business.
Lawmakers in 31 states introduced bills this year to block Chinese citizens, businesses and government from buying U.S. agricultural land or property near military bases, The Washington Post reported.
But elected leaders generally haven’t taken such steps on China crypto mining, as Hutchison said. The effect of Chinese influence on crypto mining is an emerging area of concern among lawmakers and policy analysts.
The federal Committee on Foreign Investment in the United States is authorized to review certain transactions involving foreign investment to identify national security threats. Some states are grappling with balancing laws that encourage cryptocurrency industry growth with regulations that guard against potential security threats from foreign actors.
Asked about his claim, Hutchinson’s team said “states have the ability” to restrict and regulate foreign crypto mining operations.
What is crypto mining?
Cryptocurrencies involve a decentralized network of computers around the globe that track digital currency transactions. Crypto mining is the act of generating new “coins” when computers solve complex mathematical problems. Facilities that house crypto mining computers require immense amounts of electricity as the computers operate around the clock.
Security experts worry about the risks these energy-gobbling computers pose to the U.S. power grid. But Hutchinson’s focus goes beyond energy to national security risks.
In 2021, China banned domestic crypto mining, leading Chinese crypto miners to move their operations elsewhere, including the U.S. With support from Gov. Greg Abbott and U.S. Sen. Ted Cruz, R-Texas, Texas emerged as an attractive place for crypto miners to set up shop; the state offered a mix of tax subsidies, relatively cheap electricity and incentives.
How many U.S. crypto mining operations have connections to China?
An October New York Times investigation found Chinese-owned or -operated crypto mines in Texas and at least 11 other states. Collectively, the Times said, these crypto miners use as much energy as more than 1 million homes. The mines the investigation examined included a Wyoming one near a Pentagon-supported Microsoft Corp. data center and close to an Air Force base that controls intercontinental ballistic missiles.
The Times reported that Microsoft wrote to the Committee on Foreign Investment in the United States that “the location could allow the Chinese to ‘pursue full-spectrum intelligence collection operations.’”
The article also said that some of the U.S. mining operations “appear to be straightforward efforts by wealthy Chinese nationals to make money outside the purview of Chinese authorities.” But “for others the ownership is opaque, while several can be traced to the Chinese government.”
Energy experts say these mines operate in a gray regulatory area. With concerns about Chinese government influence, some states are turning to foreign landholder laws as a possible model.
On Dec.13, Arkansas Attorney General Tim Griffin, a Republican, announced that his office was investigating more than two dozen potential crypto mining operations. The move came in response to a letter from Arkansas Agriculture Secretary Wesley Ward, who said his agency believed that two companies — including a crypto mining company — were not complying with a recent state law barring businesses controlled by a foreign entity from owning land.
Communist Party influence in Chinese businesses
U.S. crypto mining operations that are part of China’s private sector could pose a risk of Chinese government or Communist Party influence, China policy experts told PolitiFact.
“Many Chinese companies will have direct or indirect ties to the Chinese government,” said Daniel S. Markey, a senior adviser on South Asia for the U.S. Institute of Peace. “At the end of the day, the state has tremendous power to control the activities of even the most powerful Chinese businesses.”
These include very large state-owned enterprises, which are closely connected to the government, and privately owned companies. The Communist Party has been trying to tighten its influence on private companies. Since 2018 the party has required private companies listed on stock markets to have a Communist Party unit, said Deborah Brautigam, an emerita professor of international political economy at Johns Hopkins University’s School of Advanced International Studies.
According to Communist Party-provided figures, 73% of private companies had established party units by 2017, and among the top 500 private enterprises, the share exceeded 92%, according to research by the Centre for International Relations at Sciences Po in Paris.
Party units within private companies historically have been tied to recruiting and managing employees who are party members, but China’s President Xi Jinping has sought to increase the party’s influence in private companies, experts said.
“If they want to invest overseas or do foreign trade, they need permits and approvals from various government agencies,” said Yun Sun, director of the China program at the Stimson Center, an international affairs think tank. “They may not always be the government’s agent, but they will have to follow the government’s instructions and directions, or at the minimum not act against them.”
PolitiFact’s ruling
Hutchinson said China is allowed to do crypto mining in the U.S.
A New York Times investigation found Chinese-owned or -operated crypto mines in Texas and at least 11 other states. Texas has offered tax subsidies, relatively cheap electricity and incentives to attract them.
There are no laws that specifically let countries like China engage in crypto mining in the U.S. But a lack of laws prohibiting it means it is “allowed.” There are, however, federal safeguards, and some state laws protecting against foreign government-backed business influence. Arkansas is investigating at least one crypto mining company for not complying with a state law barring businesses controlled by a foreign entity from owning land.
The statement is accurate but needs clarification or additional information. We rate it Mostly True.
PolitiFact Researcher Caryn Baird contributed to this report.
Our sources
- National Law Journal, Are Regulations Coming to Address Energy Consumption in the Cryptocurrency Industry?, March 23, 2023
- East Asia Forum, “CCP branches out into private businesses,” Aug. 11, 2023
- Email interview with Daniel S. Markey, senior advisor on South Asia for the U.S. Institute of Peace, Dec. 14, 2023
- Email interview with Deborah Brautigam, emerita professor of international political economy at Johns Hopkins University’s School of Advanced International Studies, Dec. 14, 2023
- Email interview with Yun Sun, director of the China program at the Stimson Center, Dec. 14, 2023
- Phone interview with Mark Hays, senior policy analyst for Americans for Financial Reform and Demand Progress, Dec. 15, 2023
- PolitiFact, “Trump keeps saying Ron DeSantis opposed China tariffs, farmer bailout. The evidence isn’t there,” Aug. 8, 2023
- PolitiFact, “Vivek Ramaswamy offers dubious figure for China’s role in supplying pharmaceutical ingredients,” Oct. 26, 2023
- PolitiFact, “Is Nikki Haley right that China is largest developer of ‘neuro-strike weapons’?,” Nov. 21, 2023
- PolitiFact, “Nikki Haley distorts Ron DeSantis’ Chinese recruitment record in Florida,” Nov. 20, 2023
- PolitiFact, “Ask PolitiFact: Does the Chinese Communist Party own U.S. land?,” March 15, 2023
- Washington Post, “State lawmakers move to ban Chinese land ownership,” Aug. 21, 2023
- Yahoo! Finance, “How bitcoin mining works,” Oct. 7, 2021
- The New York Times, “Bitcoin Miners Want to Recast Themselves as Eco-Friendly,” March 20, 2022
- The New York Times, “China Cracks Down Harder on Cryptocurrency With New Ban,” Sept. 24, 2021
- The Houston Chronicle, “Bitcoin miners running up Texans’ electricity bills, industry fighting new regulations,” Oct. 13, 2023
- The Street, “In Texas, an Influx of Crypto Miners May Mean Higher Electricity Bills for Consumers,” March 16, 2022
- CBS News, “Texas paid bitcoin miner more than $31 million to cut energy usage during heat wave,” Sept. 7, 2023
- The New York Times, “Across U.S., Chinese Bitcoin Mines Draw National Security Scrutiny,” Oct. 13, 2023
- F.E. Warren Air Force Base, 90th Missile Wing, accessed Dec. 14, 2023
- National Law Journal, “Are Regulations Coming to Address Energy Consumption in the Cryptocurrency Industry?” March 15, 2023
- Arkansas Advocate, “Arkansas AG investigating two companies with China connections,” Dec. 13, 2023
- KATV-TV, “Arkansas investigating companies, crypto-mines with possible ties to Chinese government,” Dec. 14, 2023
- Communist Party Member Network, 2017 Inner-Party Statistical Bulletin of the Communist Party of China (translated to English using Google translation), accessed Dec. 15, 2023
- Macro Polo, “Party Committees in the Private Sector: Rising Presence, Moderate Prevalence,” Dec. 16, 2020
- The China Quarterly, “Party Building as Institutional Bricolage: Asserting Authority at the Business Frontier,” Aug. 19, 2021
https://www.statesman.com/story/news/politics/politifact/2023/12/21/mostly-true-that-china-is-allowed-to-do-crypto-mining-in-the-us/71972043007/
