Strategic Bitcoin Reserves Raise National Security Concerns
Many incidents of supply chain attacks and cyber operations have highlighted the pressing national security concerns faced today, contrasting the picture from spy novels. These realities underscore the importance of carefully considering risks when discussing policy decisions such as a proposed U.S. bitcoin strategic reserve.
When evaluating the feasibility of creating a significant federal bitcoin reserve, it is crucial to address potential national security implications, which have not been adequately addressed in the ongoing debate. President Trump’s proposal to establish a “strategic national bitcoin stockpile” should not overlook the critical aspects of supply chain attacks and cyber threats, which have the potential to pose serious risks to national security.
The concept of a strategic reserve, commonly understood as storing a vital input for emergency use, like the U.S. strategic petroleum reserve, raises questions about the necessity and effectiveness of a bitcoin reserve in enhancing national security. Despite President Trump’s vision of promoting domestic bitcoin production, the current reality shows that China holds a significant monopoly over bitcoin mining infrastructure, raising concerns about the security and reliability of such a reserve.
In examining the risks associated with bitcoin’s supply chain and potential cyber vulnerabilities, one must familiarize themselves with essential terms such as rigs, miners, and pools. Rigs, manufactured predominantly by Chinese companies, play a crucial role in processing bitcoin transactions by solving complex puzzles. The concentration of rig production in Chinese firms, coupled with reported vulnerabilities in their software, opens the door to exploitation by various actors, including the Chinese Communist Party and North Korea.
National security alarms have been sounded about Chinese rigs, as evidenced by a recent executive order that led to the shutdown of a bitcoin mine in Wyoming due to concerns about possible surveillance and espionage activities facilitated by specialized foreign-sourced equipment. Furthermore, the reliance on American energy resources to power bitcoin rigs introduces another layer of cyber risk, with the potential for remote access leading to blackouts, as observed through the CCP’s Volt Typhoon operation targeting the U.S. energy sector.
China’s influence extends beyond rig manufacturing to dominating mining pools, where operators wield significant power in selecting transactions for member miners to process. The issue of control over bitcoin computing power becomes critical when a group of miners can launch a 51% attack, compromising the integrity of the blockchain. With Chinese-operated mining pools holding a majority share of bitcoin computing power, the risks to a proposed strategic bitcoin reserve from Chinese interference become apparent, potentially jeopardizing its functionality in times of crisis.
Considering these risks, it becomes imperative to prioritize the use of U.S.-manufactured hardware and software free from CCP interference for any strategic bitcoin reserve established in the country. Encouraging the growth of American-made bitcoin infrastructure necessitates investment and deliberation on the direction of American resources and innovation in this sector.
Ultimately, the proposal for a bitcoin strategic reserve must navigate the complexities of national security risks associated with China’s dominance in the bitcoin landscape and make informed decisions to safeguard U.S. interests in the fast-evolving digital currency ecosystem.
