A missile stands near Gate 1 at Francis E. Warren Air Force Base in Cheyenne, Wyoming. (Photo by Ron … [+]
Amid rising trade tensions between China and the U.S., the recent executive order targeting cryptocurrency-related companies located near nuclear bases signals increased U.S. scrutiny of Chinese investments, a trend that is expected to continue after the U.S. presidential election in November, regardless of who wins.
On May 13, President Joe Biden issued an order banning the acquisition of property and operation of cryptocurrency mining facilities near Francis E. Warren Air Force Base in Cheyenne, Wyoming.
Ultimately, MineOne Partners Limited, a Chinese-controlled British Virgin Islands company, acquired the land in June 2022 and subsequently improved the land to enable it to be used for specialized cryptocurrency mining operations. The Order directs both the immediate sale of the foreign ownership interest in the land and the removal of the equipment and improvements added to the land.
This is the first presidential ban to rely on expanded authority over real estate transactions given to the Committee on Foreign Investment in the United States and the President under the Foreign Investment Risk Review Modernization Act of 2018. CFIUS is a federal interagency committee tasked with assessing the national security impacts of foreign investments in the United States.
This order marks the eighth time that a U.S. president has taken action under the CFIUS Act to ban foreign acquisitions of U.S. companies or real estate, and the seventh involving a Chinese-backed acquisition.
MineOne sold the land to US company CleanSpark just days before the order, which said it was unaware of the order before the deal but would now move forward.
“The Executive Order and CFIUS involvement, which we were not aware of prior to the closing, have added unexpected elements to the closing process, but we are working through these developments to achieve a satisfactory closing,” a spokesperson said in a statement to Yahoo! Finance’s CoinDesk service.
MineOne has not released an official statement.
CFIUS reportedly learned of MineOne Cloud’s real estate acquisition through tips from the public, but Hogan Lovells partner Anne Salahuddin said she expects more such information to come.
“State and local governments have expressed concerns about foreign land acquisitions in recent years, increasing the risk that a public whistleblower, like this transaction, could lead to a CFIUS investigation,” Saladin said. “So we expect to see more real estate regulatory actions in the future.”
The Treasury Department press release announcing the order included a statement from Paul Rosen, Under Secretary of the Treasury for Investment Security: “CFIUS expects complete, accurate, and timely information, especially when serious national security issues are involved,” Rosen said, suggesting that some sort of lack of trust with MineOne Cloud may have prompted CFIUS to refer the matter to the President.
In its investigation, CFIUS identified national security risks from the transaction related to the property’s proximity to an Air Force base that stores intercontinental ballistic missiles. CFIUS also assessed risks related to specialized equipment installed on the property to operate a cryptocurrency mining operation, some of which was foreign-made.
“The proximity of foreign-owned cryptocurrency mining facilities to strategic missile sites and key components of the U.S. nuclear triad, as well as the presence of specialized foreign-made equipment that could facilitate surveillance and espionage, pose significant national security risks and prompted CFIUS to report to the President,” the statement read.
But the case also highlights the limitations of CFIUS real estate regulation, which has attracted attention from Congress and others, according to an analysis by law firm Morrison & Foerster.
“If the Mine One site had been one more mile away from Warren Air Force Base, it would not have been ‘proximate’ and the acquisition of the undeveloped land would not have been a covered real estate transaction,” the analysis states.
The ban comes at a time when state legislatures are stepping up efforts to restrict foreign ownership of real estate and amid a fierce debate over the role of state legislatures in protecting state and national security — a trend that is expected to continue following the presidential transition following the November election.
“We’re likely to see greater concern in this area regardless of administration,” Salahuddin said. “CFIUS’ approach under the Biden administration has largely mirrored that of the Trump administration, with continued increased scrutiny of transactions with China and an increased focus on enforcement, regardless of the home country of foreign investors. We expect these trends to continue regardless of who wins the 2024 presidential election.”
While seven of the president’s eight bans involve Chinese companies, Saladin’s colleague and Hogan Lovells partner Brian Curran said CFIUS, and US foreign investment review policy in general, is not necessarily aimed solely at limiting Chinese influence in the US economy.
“These presidential bans reflect increased scrutiny of transactions with China, primarily since 2012,” he said. “CFIUS has effectively blocked other transactions as well, many of which likely had connections to China.”
For some transactions, CFIUS has made it clear to the parties that it will refer the matter to the President and make its decision public, allowing the parties to decide whether to abandon the deal or agree to divest before the deal reaches the President’s desk.
“But it’s also important to remember that presidential bans have only occurred in a small fraction of the cases CFIUS has reviewed,” Curran said. Between 2012 and 2022, CFIUS reviewed more than 2,000 notices, but only six presidential bans occurred during that period.
“CFIUS also addresses national security risks posed by foreign investments by imposing mitigation measures, which it imposes on a broad range of foreign investors, including those based in allied countries,” he added.
We’ve reached out to MineOne for comment and will update this post if we hear back..
