As bitcoin mining operations have sprawled across rural Texas and other remote parts of the country, questions have arisen about their impact on the power grid.

But a new concern is on the horizon as Chinese-owned companies, banned from mining crypto in their own country, have opened facilities in the U.S. The mines, which are warehouses full of powerful computers, have sometimes been located close to military bases or important infrastructure.

Gabriel J.X. Dance and Michael Forsythe have reported on Chinese crypto mine ownership for the New York Times. Dance says the web of companies and individuals who own crypto mines makes it unclear how closely connected the miners are to the Chinese government.

Listen to the interview above or read the transcript below.

This transcript has been edited lightly for clarity:

Texas Standard: You found that a number of Chinese companies operate crypto mining operations in the U.S. I guess the question that everyone is asking is, are they connected with the Chinese government or the Chinese Communist Party? And is that the primary concern?

Gabriel Dance: Well, yes. What we have found is that not only are there a sprawling number of Bitcoin mines operated by Chinese nationals, but that several of them are directly connected to the government, as well as the different political agencies in China.

But I guess it would be difficult to ascertain which are connected and which aren’t. You write that Chinese ownership is a bit of a web with multiple companies at the same address, folks involved in multiple companies and so on. What have you been able to determine?

You’re right. It can be very difficult to determine. And I was very lucky to work with my colleague Michael Forsythe, who was based in China for several years and fluent in Chinese.

And what we were able to determine is that several of these companies have direct ties back to whether it be directly with the Chinese government or associated with different political factions in China. Some of them are also just wealthy Chinese owners who are looking to make sure their currency exists outside of the reach of the authoritarian government.

What’s the nature of the national security threat? What are the implications? What would Bitcoin mines represent on that front?

The primary concern we found was specifically about one mine. This mine is located in Cheyenne, Wyoming, and it is directly adjacent to a Microsoft data center.

And what we found is that Microsoft data center filed a report with the U.S. government over concerns that this Chinese Bitcoin mine was not only located very close to the Microsoft data center, which was performing support information for the Pentagon, but it was also about a mile away from an Air Force base. And that Air Force base controls nuclear armed intercontinental ballistic missiles.

The concerns from Microsoft was that the location could allow the Chinese to “pursue full spectrum intelligence collection operations.” So the idea is that it might be a Bitcoin mine that is situated less than a mile from the Air Force base, but it might be a cover, and that cover could facilitate anything from intelligence operations to different types of data processing, information and espionage.

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I mentioned that Bitcoin mines have sprouted up all across Texas. What did you learn about Chinese ownership of mines in Texas?

So there are many Chinese-owned Bitcoin mines in Texas, and several of them are very large. The two that we spoke directly to in the story are Bitdeer and Poolin. Now, Bitdeer is perhaps the largest mine operating in the United States right now – it’s a little difficult to determine because they’re not very forthcoming; most of these companies are not very forthcoming with how large they actually are.

But Bitdeer, which is situated in Rockdale, Texas, in an old smelting plant, consumes about the same amount of energy as over 300,000 U.S. homes. So it’s a very large operation. The owner of Bitdeer, a man named Jihan Wu, was born in China, raised in China, started a very large Chinese Bitcoin mining machine company. And in 2019, that company, Bitmain, established this mine in Rockdale.

In 2021, there was a fight between the owners of Bitmain, and Jihan Wu splintered his company off into a company called Bitdeer, and that company continues to operate in Rockdale, Texas. Now, in the time since then, Mr. Wu has changed his country of residence to Singapore, which is not uncommon for Chinese nationals to do nowadays.

Is there any way of knowing whether or not either of those mines pose any national security threat or are of interest to national security staffers?

There is concern, and the concern is not necessarily at a national security level, but it is at a Texas electrical grid level, which is to say: If these mines were to turn up or down this huge power consumption rapidly at certain periods of time, they could cause rolling brownouts and even blackouts.

And if the Chinese mines were to – or any other mines were to – operate in conjunction with one another, they could bring down the entire Texas grid.

In fact, there’s a 2021 Texas law that prevents foreign adversaries from running businesses involved in the state’s infrastructure. In fact, China is actually named in that in that legislation. Is that affecting Chinese Bitcoin interests in the state? And if so, how?

It appears not to be as of yet. And that was one of the main questions that we are looking to answer with our article. What seems to be happening is these Bitcoin mines operate in a bit of a gray area,  according to the national regulator of federal grid security.

Which is to say there’s regulations that govern power generators and power transmission companies. But there’s very little regulation on power users, even very large power users.

And what the Bitcoin miners like to talk about is the benefit they bring, which is true. They are able to help grid operators balance the grid under periods of strain. But the flipside is also true, which is to say that if they were to operate in ways that are unhelpful to the grid, they could cause some pretty serious problems.

Did you get the sense that a growing Chinese involvement in U.S. Bitcoin operations has actually had an impact on the thinking of regulators or government officials? What’s happening in Wyoming?

Well, in Wyoming, it’s actually a bit of a point of controversy. What many of these small rural communities are doing are looking for industries and jobs. What they don’t quite seem to understand until the Bitcoin mine comes there is that it brings very few jobs. And the main benefit is the sales tax: They’re able to collect from the electricity sales, which is quite a bit.

But there is certainly concern at the national level and at different state levels about this problem. We spoke with a former assistant secretary for infrastructure protection at the Department of Homeland Security, and he said that there was an enormous amount of concern, particularly if the Chinese infrastructure impacts key energy systems.

And so you mentioned the Lone Star Infrastructure Protection Act. Well, that act pretty clearly makes it illegal for Chinese-owned and operated companies, as well as some other foreign adversaries, to interconnect with the electrical grid.

But I believe that Attorney General [Ken] Paxton has ruled that while that does apply to generators – so you couldn’t have a Chinese-owned wind farm, for example – I don’t believe that it’s been specified whether it whether it applies to these large electricity users.

You write that there seems to be something of a conflict between the way that Texas government officials have embraced crypto mining and a desire to be tough on China. What sort of situation did you have in mind? Was there something specific?

Well, the state has these very lucrative incentives for Bitcoin miners, which make it a very popular destination. And the company I was referring to earlier, Bitdeer, has been awarded nearly $50 million for participating in these programs that help balance the grid.

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