Cryptocurrencies are rapidly becoming a crucial part of the United States economy and financial system as Bitcoin’s value surges, thanks to the introduction of exchange-traded funds (ETFs) that bring in new consumers. While this is positive news, it also highlights the need for increased regulation, similar to other emerging technologies like AI. In a world where national security interests are at stake with each new disruptive technology, the vulnerabilities in critical network and infrastructure require urgent attention.
China is at the center of these discussions, posing a threat to the United States. The U.S. has taken decisive actions against perceived technology threats from Chinese companies like Huawei, TikTok, and Chinese EV manufacturers. However, the risk associated with cryptocurrencies, particularly Bitcoin, is even more concerning because Bitcoin miners represent a potential hardware layer integrated directly into U.S. energy and telecom infrastructure.
Bitcoin mining is the process of adding new Bitcoins to circulation and securing the network by validating and confirming transactions. Miners compete to solve complex mathematical problems, and the first to solve the problem adds the next block to the blockchain and earns Bitcoins and transaction fees.
China dominates the supply of ASICs for Bitcoin mining, supplying 98% of the chips used today. This raises concerns about U.S. trade policy, competitiveness, and national security.
Chinese companies, both state-owned and private, are legally required to cooperate with China’s intelligence services. This raises concerns about Chinese authorities using their influence within crypto mining operations to gather valuable data on U.S. domestic affairs. Moreover, the technical complexity of crypto mining equipment creates potential vulnerabilities, as Chinese-manufactured hardware could contain hidden security backdoors that allow covert data transmission or remote sabotage of critical infrastructure.
Bitcoin and related blockchains are increasingly critical to the U.S. financial system and economy, with an estimated 40% of U.S. adults owning crypto in some form. The negative impacts of a disruption in trading, mining, or price destabilization will only grow.
To address these risks, policymakers need to take swift and decisive action. This includes implementing strict cybersecurity protocols, ensuring supply chain transparency, conducting rigorous background checks on Bitcoin mining investors, and establishing international standards to address security concerns. Additionally, the U.S. must invest in and incentivize domestic companies to design advanced semiconductors for Bitcoin mining, while also banning Chinese-manufactured mining hardware and Chinese-owned Bitcoin mining operations on U.S. soil.
Creating a highly centralized supply bottleneck through an unpredictable country like China goes against the decentralized nature of Bitcoin. It not only raises questions about the longevity of the cryptocurrency system but also allows a technological Trojan horse controlled by China to enter the U.S.
In conclusion, it is crucial to address the risks associated with Chinese dominance in Bitcoin mining to protect U.S. national interests, ensure security, and promote economic growth.