How Do Digital Currencies Pose a National Security Threat to the US?
There are three ways in which crypto currencies could impact U.S. national security.
First, Bitcoin and other digital currencies are easier to "launder" than cash, i.e., move around and convert into other assets. Had DarkSide asked for cash or for the money to be wired to a foreign bank, it would have been far easier to track where the money was going.
Moving large quantities of cash without government sanction is difficult. Just try to buy a car, much less a house, for cash. Likewise, even if a foreign bank had been willing to accept and process the wire transfer, any financial institutions that participated in the transaction without regulatory approval would find themselves frozen out of the SWIFT network.
SWIFT stands for
Society for Worldwide Interbank Financial Telecommunication, legally S.W.I.F.T. SCRL. It "provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment." A bank frozen out of the SWIFT network could not deal with other banks and would find it impossible to operate internationally or do much more than provide local banking services.
A comparable regulatory structure for digital currencies has not yet evolved. More regulation is coming but, since digital currencies can be transferred directly through peer-to-peer networks, regulatory agencies may never have the degree of control over digital currencies that they do over electronic financial transactions involving conventional currencies.
By making it easier to monetize criminal activity, the rise of digital currencies may lead to an increase in criminal activity, especially activity like ransomware that can be conducted remotely. While any one activity may not rise to the level of a national security threat, the possibility of an overall increase in criminality does -- especially when those criminal acts are being conducted by foreign bad actors against American companies, U.S. government agencies or elements of critical American infrastructure.
Secondly, the creation of digital currencies represents an enormous transfer of wealth. Take Bitcoin, for example. Currently, approximately 900 Bitcoins are created each day. At the time of this writing, Bitcoin was trading at approximately $40,000 per coin. That means $36 million of Bitcoin is made -- the term used is "mining" -- each day, or approximately $1 billion a month.
In
April 2020, for example, 65% of all Bitcoin mining occured in China. The next five largest Bitcoin miners are the U.S., 7.24%; Russia, 6.9%; Kazakhstan, 6.17%; Malaysia, 4.33%; and Iran, 3.82%.
CNBChas estimated that Chinese Bitcoin mining may be as high as 75%; others have suggested that the number of Chinese Bitcoin miners could be as high as 85% or more.
Close to 90% of Bitcoin mining is being done by countries that the U.S. considers adversaries. On balance, these countries have been net sellers of Bitcoin over the last several years, while U.S. and European investors and financial institutions have been net buyers.
It's not entirely clear who all the Chinese, Russian and Iranian entities mining Bitcoin are or what links, if any, they have to their government or military. They may not have any. The Iranian Revolutionary Guard Corps, however, has long been rumored to be involved in Bitcoin mining.
The current pace of activity represents a transfer of over $10 billion of wealth each year from the U.S. and its European allies to potential adversaries. That transfer represents only new mining activity. It does not take into account the appreciation in previously mined Bitcoin that those miners may have retained. That also applies, on a smaller scale, to the transfer of wealth to North Korean Bitcoin miners, an activity that is certainly occurring under government control and whose scope is unknown.
The third and most serious threat to U.S. national security is the impact of digital currencies on both the status of the dollar as a reserve currency and on American control over the institutions/mechanisms of the international monetary system.
The U.S. government obtains an enormous amount of political leverage from its influence over the institutions/structures of the international monetary system. That influence is the result of a number of factors: the role of the dollar as a reserve currency; the fact that much of the world's trade, including the trade in commodities, is denominated in dollars; the size of the U.S. economy (still about a quarter of global gross national product); the role of U.S. banks in the international system; and de facto U.S. control over many of the institutions that enable global capital flows.
Over the last several decades, successive administrations have used economic and financial sanctions as a preferred alternative to armed conflict and as a key instrument of foreign policy. Any development that erodes the U.S. position astride the international monetary system directly impacts the tools that Washington has available to implement its foreign policy and, by extension, will raise national security issues.
finance.yahoo.com
