How Trump’s disruption of the crypto supply chain could be a security risk for the U.S.

The world’s three best-selling makers of bitcoin mining machines—all of Chinese origin—are setting up manufacturing footholds in the United States as President Donald Trump’s tariff war reshapes the cryptocurrency supply chain.

Bitmain, Canaan, and MicroBT build over 90% of global mining rigs—essentially computers dedicated to number-crunching that produces bitcoin. Establishing U.S. bases could shield them from tariffs but risks stoking security concerns the U.S. has with China in areas as varied as chip making and energy security.

“The U.S.-China trade war is triggering structural, not superficial, changes in bitcoin’s supply chains,” said Guang Yang, chief technology officer at crypto tech provider Conflux Network.

Moreover, for U.S. firms, “this goes beyond tariffs. It’s a strategic pivot toward ‘politically acceptable’ hardware sources,” Yang said.

Bitmain, the biggest of the three by sales, started U.S. production of mining rigs in December in a “strategic move” following Trump’s presidential electoral win a month earlier.

Canaan started trial production in the U.S. with the aim of avoiding tariffs after Trump on April 2 announced his so-called Liberation Day levies, senior executive Leo Wang told Reuters. The initiative is exploratory as the volatile tariff situation precludes heavy investment, he said.

Third-ranked MicroBT in a statement said it is “actively implementing a localisation strategy in the U.S.” to “avoid the impact of tariffs”.

The trio dominate a sector analysts estimated to be worth $12 billion by 2028. It is the upstream of a business chain that extends through the energy-intensive process of mining bitcoin, the supporting IT infrastructure and the trading platforms.

U.S. rival Auradine—backed by top bitcoin miner by market value, MARA Holdings—has been lobbying to restrict Chinese supplies to stimulate competition in hardware.

“While over 30% of global bitcoin mining occurs in North America, more than 90% of mining hardware originates from China representing a major imbalance of geographic demand and supply,” said Auradine’s chief strategy officer, Sanjay Gupta.

Consultancy Frost & Sullivan estimated the top three held 95.4% of the hardware market in terms of computing power sold as of December 2023.

When it comes to Chinese mining rigs, “hundreds of thousands of them connected to the U.S. electrical grid” is a security risk, Gupta said.

Canaan’s Wang said mining rigs do not threaten security because “they are useless if not applied to bitcoin mining”. Still, manufacturers could suffer “collateral damage” from U.S. restrictions on high-tech sales to Chinese firms, he said.

Underscoring the risk, Bitmain’s AI affiliate, Sophgo, has been blacklisted by the U.S. government on security grounds.

Bitmain did not reply to a request for comment.

FIRST-MOVER

China once dominated the entire bitcoin value chain—from rig-making through mining to trading—until its government banned cryptocurrency activity on the Chinese mainland in 2021 citing risk to financial stability.

Miners, traders and exchanges moved abroad. Shielded by their role as technology manufacturers, however, Bitmain, Canaan and MicroBT continued to dominate in hardware. They fended off Western rivals partly due to first-mover advantage in developing high-performance chips tailor-made for mining.

Canaan has since moved its headquarters to Singapore from China—though it still has Chinese operations—and set up a pilot production line in the U.S., a market that contributed 40% of revenue last year.

“The rationale is to try to reduce the cost for both us and our customers,” said Wang, Canaan’s vice president of corporate development and capital markets. The prospect of tariffs means “we have to explore all alternatives”.

The U.S. this year imposed a 10% baseline tariff on imports from many countries plus an extra 20% on imports from China. It has also said it could increase tariffs for Southeast Asian countries where Chinese rig makers have set up assembly plants.

CHOKE POINT

Trump has promised to be the “crypto president” who popularises cryptocurriencies’ mainstream use in the United States. Son Eric Trump together with energy and technology firm Hut 8 launched miner American Bitcoin with the goal of building a strategic bitcoin reserve.

The president’s crypto-friendly policies, however, can only highlight China’s outsized role in bitcoin infrastructure, potentially putting rig makers in the crosshairs.

China’s hardware dominance “creates a choke point for U.S. miners,” said John Deaton, a U.S. crypto-law attorney.

“If China restricts exports or manipulates supply . . . it could disrupt bitcoin’s network stability and affect U.S. users and investors,” Deaton said.

The biggest miners by market value—MARA, Core Scientific, CleanSpark, and Riot Platforms—are all U.S.-based, so over-reliance on hardware of Chinese origin “is potentially problematic”, said Ryan M. Yonk, an economist at the American Institute for Economic Research.

Chinese rig makers might be setting up shop in the U.S. but in the short term, U.S. miners will still buy rigs from China and be stung by higher import costs, said Kadan Stadlemann, chief technology officer at crypto platform Komodo.

“But this isn’t about hurting the industry. It’s about forcing a long-overdue shift,” he said.

—Samuel Shen and Vidya Ranganathan, Reuters