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?”
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.”
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.
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