China's Resurgence in Bitcoin Mining: Strategic and Security Implications for Global Infrastructure and U.S. Competitiveness

In 2025, China's Bitcoin mining sector has staged a quiet but significant comeback, defying its 2021 regulatory ban. Despite operating in a legal gray zone, underground miners in regions like Sichuan and Xinjiang leverage seasonal hydropower and surplus coal energy to maintain a 14.05% global hashrate share, ranking third behind the U.S. and Russia, according to a CryptoNews report. This resurgence raises critical questions about energy transparency, cybersecurity vulnerabilities, and the U.S.'s ability to compete in a geopolitically charged digital economy.

The Underground Infrastructure and Energy Paradox

China's mining operations thrive in remote areas where energy costs are low. Sichuan's hydroelectric plants, for instance, provide cheap power during the rainy season, while Xinjiang's coal and wind resources sustain year-round activity, according to a BeInCrypto analysis. However, the opacity of these operations creates risks. A report by BeInCrypto highlights that China's energy mix remains dominated by coal-led by companies like China Shenhua Energy-despite growing renewable investments, as shown in China Shenhua Energy's earnings report. This duality complicates global assessments of Bitcoin's carbon footprint and exposes the network to geopolitical energy shocks.

ASIC Dominance and Cybersecurity Risks

China's control over 98% of Bitcoin ASIC production-primarily through Bitmain and TSMC-manufactured chips-grants it outsized influence over global mining infrastructure, according to a Cryptometer report. This dominance introduces cybersecurity risks. Chinese law mandates that companies cooperate with national intelligence agencies, raising concerns about potential backdoors in firmware or hardware, as discussed in a Cointelegraph analysis. For example, that analysis warns that mining facilities near U.S. power grids or communication hubs could serve dual purposes, enabling covert data collection or sabotage, as Cryptonews notes.

The U.S. Treasury and CFIUS (Committee on Foreign Investment in the United States) have responded by proposing stricter cybersecurity protocols and supply chain transparency measures, according to Cointelegraph. Some experts advocate for a complete ban on Chinese ASICs in the U.S., mirroring restrictions on Huawei in telecom infrastructure, a position also reported by Cointelegraph.

U.S. Policy and the AI Pivot

Faced with China's resurgence and the 2024 Bitcoin halving's profit cuts, U.S. miners are pivoting to AI computing. CleanSpark, Marathon Digital, and Riot Platforms are repurposing their data centers and energy contracts to support AI workloads, capitalizing on the $1.3 trillion AI infrastructure boom, according to a Carbon Credits report. CleanSpark's Georgia data center project, for instance, leverages existing power infrastructure to reduce costs and time-to-profitability, the Carbon Credits report notes.

The Biden administration's 2025 Executive Order on crypto emphasizes cybersecurity collaboration and regulatory clarity, while states like Arizona and Oklahoma offer tax incentives to attract AI-focused mining firms, according to a Global Legal Insights overview. Conversely, New York's proposed two-year moratorium on proof-of-work mining reflects growing environmental and security concerns, as Global Legal Insights discusses.

Geopolitical Tensions and Supply Chain Vulnerabilities

Beyond mining, China's influence extends to critical supply chains. The Dutch government's 2025 seizure of Nexperia-a Chinese-owned semiconductor firm-sparked retaliatory measures and disrupted auto production for Volkswagen, according to a FinancialContent report. Similarly, U.S.-China tensions in shipbuilding (China controls 53% of global shipyard output) highlight the fragility of global trade, as Lockton warns. These incidents underscore the need for domestic semiconductor production, as outlined in the CHIPS Act, to reduce reliance on foreign suppliers-a theme emphasized in coverage by Cointelegraph.

Investment Considerations

For investors, the interplay of these factors creates both risks and opportunities. China's hashrate resurgence and ASIC dominance pose long-term threats to Bitcoin's decentralization and security. However, U.S. miners adapting to AI and regulatory clarity could outperform peers. Jane Street Capital's $205 million investment in Bitcoin mining stocks like Hut 8 and Bitfarms signals confidence in the sector's resilience, according to a Yahoo Finance report.

Conclusion

China's Bitcoin mining resurgence is a double-edged sword: it underscores the sector's adaptability but also exposes systemic vulnerabilities. As the U.S. navigates regulatory, technological, and geopolitical challenges, the race to secure Bitcoin's infrastructure will hinge on balancing innovation with security. For now, the hashrate war-and the AI revolution it fuels-remains a defining battleground of the digital age.