If Bitmain faces challenges, which aspect of US mining equipment will be affected first?

The US government has initiated a security assessment of Bitmain, the Beijing-based producer that supplies the majority of the world’s Bitcoin mining equipment. A prolonged federal inquiry, referred to internally as Operation Red Sunset, has been investigating whether Bitmain’s devices can be remotely manipulated for surveillance or utilized to disrupt the American power grid. While the inquiry may seem abstract, the implications are evident in everyday locations: repair facilities in North Dakota, shipping docks in Oklahoma, and the upgrade schedules of miners reliant on Chinese technology.

To comprehend the ramifications, it is essential to grasp what actions Washington is undertaking.

Inside Operation Red Sunset

As per documents examined by Bloomberg and sources familiar with the situation, Red Sunset has been active across multiple agencies for approximately two years. The Department of Homeland Security is leading the effort, with assistance from the National Security Council. The investigation aims to ascertain if Bitmain’s equipment can be externally controlled in ways that could facilitate espionage or sabotage.

Federal agents have already engaged with hardware. Certain Bitmain shipments were halted at US ports and disassembled for inspection, with their chips and firmware scrutinized for concealed functionalities. Officials also examined tariff and import issues, merging security concerns with standard trade enforcement.

In a statement sent via email to Bloomberg, the company asserted that it is “unequivocally false” to claim it can remotely control machines from China, emphasizing its compliance with US law and lack of involvement in activities that jeopardize national security. It also stated that it is unaware of any investigation named Operation Red Sunset and that previous detentions of its equipment were related to Federal Communications Commission issues, where “nothing out of the ordinary was found.”

Officials are not discussing this in isolation. A report from the Senate Intelligence Committee has already identified Bitmain devices as susceptible and potentially manipulable from China. A few years back, researchers discovered Antminer firmware that permitted remote shutdown; Bitmain characterized this as an incomplete anti-theft feature and subsequently patched it, but the incident left a lasting impression.

Red Sunset is also based on a concrete case. In 2024, the US government compelled a Chinese-affiliated mining operation near a missile base in Wyoming to cease operations due to national security concerns associated with thousands of rigs at that location. The hardware was comparable, but the geographical context was significantly more sensitive.

Consequently, the government is viewing Bitmain as more than just a supplier. It is considering the company as an infrastructure entity that operates near the grid and occasionally near strategic sites. This perspective places an ASIC manufacturer alongside telecom firms and power equipment in the same documentation.

All of this is occurring while Bitmain strengthens its connections with a prominent American client.

America’s mining machine is full of Bitmain metal

In March, a relatively obscure publicly listed company announced plans to launch a new Bitcoin mining venture with Eric and Donald Trump Jr. as investors. The new entity, named the American Bitcoin Corp, aims to become the “world’s largest, most efficient pure-play Bitcoin miner” and intends to operate 76,000 machines across Texas, New York, and Alberta. To achieve this ambitious target, it has turned to Bitmain.

Corporate documents reveal that American Bitcoin has agreed to purchase 16,000 Bitmain rigs for $314 million. Rather than using cash or conventional debt, the company has pledged 2,234 BTC to secure the equipment. This arrangement is unusual enough that a former SEC enforcement attorney informed Bloomberg that the terms likely require more detailed disclosure.

This single agreement encapsulates the dependency issue in miniature. A high-profile miner, linked to the president’s family, is committing thousands of Bitcoin and ambitious growth objectives to a Chinese supplier currently under national security scrutiny. Officials are already concerned that this arrangement creates conflicts of interest for an administration aiming to establish the US as the “crypto capital of the world.”

However, despite the significant power they intend to allocate to Bitcoin mining, the president’s sons represent just a small fraction of a much larger landscape. Over the past decade, US miners have deployed hundreds of thousands of Bitmain units nationwide. The process of generating new Bitcoin in North America largely relies on Antminers, powered by chips and software that were never intended to withstand this level of geopolitical scrutiny.

Thus, when questioning what occurs “if Bitmain gets hit,” one is essentially inquiring about the consequences when the central supplier in that ecosystem encounters federal policy, rather than merely market risk.

What breaks first if Washington swings

Every serious miner maintains a pipeline of non-functional hardware. Failures in fans, power supplies, and hashboards are common. Some of these issues can be managed internally, but a significant portion is routed through authorized repair centers within the Bitmain ecosystem. The company lists international and regional repair facilities that service the US market, with shipping routes passing through locations like Arkansas, North Dakota, and Oklahoma.

This supply chain is quite fragile and the most likely to be disrupted first. If the US government opts for stringent measures, such as placing Bitmain or key affiliates on an entity list or imposing targeted sanctions, the simplest action would be at the border. Spare parts could remain in temporary storage until they undergo customs “review.” A process that previously took days could extend into weeks while legal teams and compliance departments navigate new regulations.

For an individual mining operation, the impact will manifest gradually. Availability may decrease slightly as more machines remain inactive awaiting parts, and the accumulation of failed units on-site will continue to rise. Operators with substantial resources will, of course, be able to stockpile spare parts and mitigate risks with a secondary vendor. However, smaller miners, who acquired a few containers of rigs through structured financing and lack a warehouse full of backup components, will experience significant stress quickly.

Next in line would be the major orders.

If Red Sunset concludes with milder measures, such as additional licensing for specific chips or mandatory export reviews, Bitmain may still be able to ship S21 and T21 orders to the US, albeit on a delayed timeline. A miner anticipating six-week lead times could easily face three months or more for delivery, plus additional paperwork. If the outcome is more severe, and Bitmain is restricted from supplying certain US clients, those orders could shift from scheduled deliveries to uncertain prospects.

Given that the sector is heavily financed, delays are not merely time lost: they also incur interest, covenants, and equity implications. A public miner that has informed investors it would achieve a specific exahash target by a designated quarter will now need to clarify why the equipment is stalled somewhere between Shenzhen and Houston.

As soon as uncertainty impacts the new-machine pipeline, the secondhand market becomes active. Older Antminers that were nearing retirement suddenly appear appealing, provided their efficiency remains competitive. MicroBT and Canaan, Bitmain’s primary competitors, will see their sales teams become very busy very quickly.

However, they do not possess a magical warehouse filled with high-efficiency equipment either. They face their own production constraints, chip allocations, and promised deliveries. If US miners attempt to pivot en masse, lead times for alternative hardware will also extend. Some of that gap may be filled through gray channels, with rigs shipped via third countries or purchased from intermediaries that can still access Bitmain inventory without violating US regulations.

Three paths from here

From an external perspective, it is tempting to view the situation in binary terms: either Bitmain is banned or nothing occurs. In reality, there are three broad scenarios.

In the first scenario, Red Sunset quietly dissipates. DHS continues monitoring, perhaps files some internal recommendations, and the government concludes that the existing industrial security protocols, network segmentation, and firmware audits are sufficient to mitigate the risk. Bitmain remains politically contentious but commercially viable. Miners diversify slightly into MicroBT and Canaan, yet the fundamental structure of the US fleet remains intact, and hash rate growth continues along a trajectory similar to its current path.

In the second scenario, Bitmain is confined to a managed framework. This could involve formal mitigation agreements requiring the company to adhere to strict firmware attestation standards, undergo third-party audits, and limit certain repair and assembly tasks to vetted domestic partners. Exports may necessitate additional licenses, and high-risk locations, such as those near sensitive grid infrastructure or military installations, could face specific regulations.

This scenario is inconvenient rather than catastrophic for miners. Lead times will lengthen, legal expenses will increase, and engineers will spend more time demonstrating that their operations comply with whatever new security standards Washington establishes. Hardware will still be delivered, albeit with increased friction and higher overall costs per installed terahash.

The third scenario is the one that operations dread: sanctions or an entity list designation that directly impacts sales, firmware support, and financial transactions. In this scenario, Bitmain equipment becomes undesirable for regulated US buyers almost immediately. Repair centers struggle to transport parts across borders. Software updates become stalled in a legal gray area. Existing fleets can continue to operate, but their owners must carefully consider how long they wish to remain reliant on a vendor that cannot service or upgrade their machines.

Hash rate would not plummet, as this is not akin to Huawei in the core network. However, growth plans would be affected. A significant portion of capacity that was expected to integrate into American grids over the next two quarters would be delayed or relocated abroad, and the narrative that Bitcoin mining is evolving into a US-centric, grid-friendly industry would begin to appear less robust.

Why this matters beyond mining Twitter

On the surface, this is a niche issue concerning customs holds, but beneath it lies a critical examination of how the US approaches the physical infrastructure of Bitcoin.

Washington has already determined that mining locations can be significant, as evidenced by Wyoming’s experience when its Chinese-linked facility near a missile base was shut down. It is currently conducting an active investigation into Bitmain’s hardware, with agents dismantling rigs and legal experts deliberating whether Chinese-made ASICs should be regarded more like telecom equipment than gaming devices. Additionally, it has a presidential family whose flagship mining venture is contractually linked to that same supplier.

If the government retreats or imposes only minor penalties, the implication is that Bitcoin’s industrial framework can withstand intense scrutiny while still operating within a global hardware market. Conversely, if it forces Bitmain into a restricted framework, the implication shifts significantly. Miners will interpret this as the beginning of a broader initiative to localize or at least mitigate risks associated with key components of the mining stack.

For others, the stakes are elevated one level higher. The security budget that safeguards Bitcoin is funded through these machines. The more costly, complex, and politically sensitive it becomes to operate them in the US, the more of that budget will be redirected elsewhere.

The central question is what breaks first within the mining machine if Bitmain is impacted. The quieter inquiry is whether the US desires those machines operating on its own power grid or prefers to relocate them to another region.

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