National security experts warned that China is already using financial platforms, cryptocurrency mining, and political influence operations to threaten Americans’ rights, data, and critical infrastructure during a Texas House committee hearing.
During a Thursday hearing before the Committee on Homeland Security, Public Safety & Veterans’ Affairs, State Armor CEO Michael Lucci testified that China-based companies have obtained licenses to transmit money in the United States, but still operate under Chinese law—including a 2017 directive that instructs all its corporations to collect intelligence on behalf of the Chinese Communist Party.
He pointed to Alibaba, a popular online marketplace, as a case study. Alibaba was sued by the Department of Justice over allegations that the platform failed to prevent the sale of illegal pharmaceutical equipment and drug paraphernalia. The DOJ reached a $600 million settlement on July 1.
The Pentagon also sanctioned Alibaba in June over allegations that the company was connected to the Chinese military and was operating on U.S. soil. The Pentagon’s investigation came after an alleged White House memo said that the CCP and People’s Liberation Army were using the online marketplace to build “target packages” against American citizens, including IP addresses, Wi-Fi information, and payment records.
Kelley Currie, a senior fellow at the Atlantic Council, focused on Chinese transnational crime organizations and how they can operate. Currie attested that the financial systems housed within Alibaba or WeChat are “money movers and [the] accountants for not only their own criminal activity, which includes industrial scale scam centers across Southeast Asia, operating most of the drug trafficking in Southeast Asia, and huge human trafficking networks in Asia, they also serve as the bankers for the Mexico and Latin America-based drug cartels and other criminal activity in the United States.”
When asked whether or not there are security risks present with Chinese cryptocurrency miners in the United States, Currie replied that “[t]here absolutely are” and that “crypto kiosks in particular [are] a major vector for fraud and scams [and] also serve as a source of revenue for these criminal activities.”
Lucci then warned lawmakers of the risks that cryptocurrency mining centers present to Texas infrastructure, stating that a recent Senate intelligence report found that some Chinese mining centers can be accessed remotely and can increase their use of electricity to that of a steel manufacturing plant in roughly three seconds.
“If those are remotely controlled by China, they can throw incredible oscillations across the Texas electrical grid,” he noted.
The Chinese government is also utilizing a united front system, reported Lucci. The united front system is a strategy that the CCP uses to ally with anti-American groups and influence the political environment.
Cheryl Yu, a fellow of Chinese studies at the Jamestown Foundation, testified regarding the extent and efficacy of the united front system.
According to Yu, the united front “is a political weapon the CCP uses to cultivate and mobilize a broad circle of friends. The party itself says the goal is to expand that circle of friends, and in their own words, to shatter the enemy’s position.”
Yu warned that most united front work does not look political in nature.
The process works by identifying local leaders and organizations and building trust over time. Later, the CCP makes requests through those relationships.
“Business, cultural, educational, and scientific exchange[s] can all be fronts for united front work,” Yu said.
“The current Chinese leadership very explicitly endorses this method of political warfare, and the number one target is the United States,” said Lucci.
Lucci warned the committee of a recent July 27 summit in Beijing where President Xi Jinping issued a directive to 60 million Chinese foreign nationals living overseas to “actively serve the motherland.”
He testified that the CCP’s united front movement seeks to commit intellectual property theft and crush any dissent against the communist regime through censorship. The Chinese consulate in Houston was ordered shut down in 2020 due to the theft of intellectual property.
Former U.S. Secretary of State Mike Pompeo warned all state governors at the time that foreign adversaries were actively targeting their offices.
Lucci also cited a New York Times exposé finding that more than 50 nonprofit and community organizations in New York City, many tied to the Chinese consulate, had endorsed or raised money for local candidates in violation of U.S. tax law and helped defeat politicians who opposed China’s authoritarian government.
Adam Blair, a senior fellow at the Texas Public Policy Foundation, offered several solutions to counter the CCP’s influence in the United States.
Blair stated that local law enforcement agents do not “have the tools necessary to” pursue foreign terrorist organizations. He also suggested expanding House Bill 45 to create a larger intelligence network shared across all levels of law enforcement to counter foreign threats, including the united front.
Chad Seely, a chief compliance officer for ERCOT, attested that the Lone Star Infrastructure Protection Act (LSIPA) has significantly bolstered the Texas grid’s security by requiring companies that connect directly to the grid to reveal any relationships with foreign adversarial nations.
Seely stated that companies are allowed to have relationships with countries like China, but must sign an attestation form stating that the adversarial country does not have access to the grid. Seely stated that they have already removed an entity due to noncompliance with LSIPA.
However, despite LSIPA protections, ERCOT relies on the attestation forms as proof, with the possibility of later scrutinizing the installed hardware.
“So, we’re basically just taking their word,” noted State Rep. Katrina Pierson (R–Rockwall).
LSIPA also allows for some infrastructure that interfaces with the grid, including batteries or solar inverters, to be accessed and repaired for warranty purposes.
“The concern is not solely the presence of foreign manufactured components. To be blunt, if you build something here and put a communication network in it that can be entered into, you can disrupt the component,” said Emma Stewart, the chief power grid scientist and research strategist at Idaho National Laboratory.
Both Stewart and Seely testified that ERCOT officials must escort any team of technicians accessing critical grid infrastructure. Technicians are also under surveillance throughout the entire repair process.
Committee Chairman Cole Hefner suggested that more may be done in the next legislative session to combat the threat posed by China.
The 90th Texas Legislature Session is set to convene January 12, 2027.
