Crypto Mining, Data Center Facilities See New CFIUS Barrier

Industry trends could make 2024 another banner year for physical infrastructure development in the emerging technologies space. But the year is also on track to kickstart an era of increased government scrutiny.

This scrutiny focuses on the land acquisitions that often precede construction of cryptocurrency mining facilities and data centers more generally. Foreign-backed land acquisitions throughout large swaths of the US could trigger national security concerns with serious financial consequences.

The Treasury Department’s proposed rule published July 8 would expand the geographic reach of the Committee on Foreign Investment in the United States over foreign-backed real estate investments in the US. CFIUS’ jurisdiction encompasses transactions that involve real estate with potential national security implications—most notably, land near military installations and other critical US government facilities.

Existing rules can implicate real estate at or near airports and maritime ports. That capability made headlines in May when President Joe Biden required cryptocurrency mining company MineOne to divest its 2022 land acquisition near an Air Force base in Wyoming due to its Chinese financial backing.

CFIUS’ new rule would bring 59 additional facilities under the committee’s purview. For several existing facilities, it would increase the radius of CFIUS’ jurisdiction over foreign investments in US land to 100 miles of the facility, compared to just one mile now.

The new rules, paired with the MineOne divestment order, signal the Biden administration’s increasing willingness and capacity to inspect corporate deals that involve foreign investment proximate to sensitive facilities. This trend is particularly relevant to the cryptocurrency and data center industries, which frequently implicate foreign investment in US land.

The potential for CFIUS scrutiny stretches from coast to coast. Current and proposed sites mirror some of the most popular states for cryptocurrency mining and data center facilities, including Texas, Georgia, Virginia, California, and Tennessee.

Investors and developers involved in these land deals would benefit from understanding CFIUS’s capabilities from the onset of investor identification, deal negotiation, and project development. Interaction with a foreign party at any stage of a deal could complicate regulatory oversight across the lifespan of an investment.

With no statute of limitations and a wide-ranging jurisdiction, CFIUS’ scrutiny could make or break the physical infrastructure development that fuels power-dense technologies such as crypto and AI.

Agency activity is under a new microscope with the US Supreme Court’s recent reversal of the Chevron case, under which courts had deferred to reasonable agency interpretations of ambiguous statues and unclear laws. At the same time, agencies and interagency committees such as CFIUS continue flexing regulatory muscles and may continue receiving deference on national security grounds.

Entities facing enforcement actions under these proposed rules (for example, an entity facing forced divestment of a foreign real estate investment proximate to one of these facilities) might challenge CFIUS’ assessment of the national security risk posed by that investment and, as part of such a challenge, question the scope of CFIUS’ authority more broadly.

Any ramifications of Chevron’s demise for the foreign investment regulatory landscape, however, have yet to unfold. In the meantime, companies with foreign ties can benefit from understanding the proposed rule and its broad reach.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Michelle Kallen and Alexis Early are partners at Jenner & Block. Summer associate Darby Hopper contributed to this article.

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