Crypto for Conflict: A Proposal to Restrict Digital Assets to Wartime Use

Many have spoken about the need for American leadership in technology and the potential of digital assets. Vice President Vance has a point about paying attention to what global competitors like China are doing in the crypto space. However, the current conversation around cryptocurrency for everyday infrastructure and investment is a distraction from its most strategic and vital use case: national security.

Instead of trying to fit this technology into a peacetime financial system, we should be harnessing its power for when we need it most. I propose we treat the infrastructure of cryptocurrency like a strategic military asset, to be deployed only in times of war, much like war bonds. This isn’t about the coins themselves, but about the underlying technology and ASICs – a decentralized, resilient network that can be activated by the military upon a formal declaration of war.

This approach addresses the national security risks of unregulated crypto, while giving the U.S. a powerful economic and strategic tool in a time of conflict. It’s not about stifling innovation; it’s about focusing that innovation where it can have the most decisive impact for our nation.

Proposed Legislation: The Wartime Digital Asset Act

A BILL

To restrict the use of cryptocurrencies and stablecoins to times of declared war, and for other purposes.

BE IT ENACTED BY THE SENATE AND HOUSE OF REPRESENTATIVES OF THE UNITED STATES OF AMERICA IN CONGRESS ASSEMBLED,

SECTION 1. SHORT TITLE.

This Act may be cited as the “Wartime Digital Asset Act”.

SECTION 2. FINDINGS.

The Congress finds that—

(1) The proliferation of unregulated cryptocurrencies and stablecoins poses a significant and ongoing risk to the national security and economic stability of the United States. (2) The decentralized and borderless nature of these digital assets can be exploited by adversaries to evade sanctions, finance illicit activities, and undermine the global financial system. (3) The underlying blockchain technology of digital assets and ASICs, however, have strategic value as a resilient and decentralized network for financial transactions. (4) It is in the national interest of the United States to harness this technology for strategic purposes while mitigating its risks.

SECTION 3. RESTRICTION ON PEACETIME USE OF DIGITAL ASSETS.

(a) PROHIBITION.—Except as provided in subsection (b), it shall be unlawful for any person subject to the jurisdiction of the United States to— (1) create, issue, or transact in any cryptocurrency or stablecoin; or (2) operate any cryptocurrency exchange or digital asset platform.

(b) EXCEPTIONS.—The prohibition under subsection (a) shall not apply to— (1) research and development of digital asset technology by approved government agencies and their designated contractors; and (2) any other activity specifically authorized by the Secretary of the Treasury, in consultation with the Secretary of Defense, for national security purposes.

SECTION 4. ACTIVATION OF DIGITAL ASSET INFRASTRUCTURE DURING WARTIME.

(a) AUTHORIZATION.—Upon a formal declaration of war by Congress, the President is authorized to— (1) direct the Secretary of the Treasury to issue a designated, military-grade digital asset for the purpose of financing the war effort and supporting critical infrastructure; and (2) authorize the operation of designated digital asset platforms for the issuance, exchange, and redemption of the military-grade digital asset.

(b) TERMINATION.—The authorization under this section shall terminate no later than one year after the cessation of hostilities.

Counterarguments and Rebuttals

Here are some potential counterarguments to this proposal, along with rebuttals:

Counterargument 1: This will stifle innovation and cede leadership in a critical technology to other countries.

• Rebuttal: This legislation does not ban research and development. In fact, it encourages focused innovation by government agencies and their contractors. True technological leadership is not about adopting every new technology for every purpose, but about using it strategically. By focusing on the most critical use case, we can ensure that we have the most robust and secure system when we need it most, without the distractions and risks of a volatile consumer market.

Counterargument 2: Cryptocurrency was essential for humanitarian aid and crowdfunding in the Ukraine war. This legislation would prevent such uses.

• Rebuttal: The Act allows for specific authorizations by the Secretary of the Treasury for national security purposes. This would allow for the use of digital assets to support allies and humanitarian efforts in a controlled and strategic manner, without the risk of those same channels being used by adversaries to evade sanctions.

Counterargument 3: A complete ban is too extreme. Regulation, not prohibition, is the answer.

• Rebuttal: The current regulatory landscape is a confusing patchwork of rules that have failed to prevent fraud, money laundering, and other illicit activities. A clear, bright-line rule is easier to enforce and sends a strong signal about the intended purpose of this technology. The risks of unregulated crypto to our financial system and national security are too great to leave to a complex and easily circumvented regulatory framework.

Counterargument 4: This is an infringement on personal and economic freedom.

• Rebuttal: The government has a long history of regulating financial instruments and activities to protect national security and economic stability. The risks posed by a completely decentralized and unregulated financial system are a threat to the economic freedom of all citizens. This Act is a necessary measure to protect the integrity of our financial system and the security of our nation.

Counterargument 5: Adversaries like Russia and China are already exploring cryptocurrency to evade sanctions. Banning it in the U.S. would put us at a disadvantage.

• • Rebuttal: This legislation does not put us at a disadvantage; it gives us a strategic advantage. While our adversaries are trying to use a chaotic and unregulated system to their advantage, we will be developing a secure, military-grade digital asset infrastructure that can be deployed decisively in a time of war. This is the difference between using a makeshift tool and a precision instrument.