The Blockchain Industry Urgently Needs a NatSec Strategy For Washington, DC

A surge in public blockchain adoption and the proliferation of cryptocurrencies have propelled the need for a robust regulatory framework that safeguards U.S. national security and economic interests. Central to this cause is the crypto lobby, a collective of industry stakeholders advocating for fair and balanced regulations that foster growth while mitigating risks. By actively engaging with policymakers and promoting responsible practices within the industry, the crypto lobby can play a pivotal role in shaping regulations that protect national security interests. However, the crypto lobby faces a considerable challenge in addressing concerns over national security and foreign influence. As the crypto lobby navigates the complex landscape of regulatory politics, it must cease defending bad actors and confront the national security risks head-on.

The whole blockchain industry must address the reality that crypto is here for good and will be out there for anyone to use, ranging from dissident activists in Russia, rebels fighting the CCP-backed Myanmar Junta, and the CCP themselves. This list includes Russia, Iran, North Korea, Venezuela, and many non-state actors like terror groups and organized crime. We must be able and willing to address the good, the bad, and the ugly that crypto and public blockchains bring to society. Two large-scale hot wars in two different regions of the world are both partly funded by cryptocurrency via a mix of OTC desks, centralized exchanges, and DeFi products like DEXs and mixers, which obviate fund origins using complex cross-chain swaps powered by smart contracts. This has inevitably led some in Washington, DC, to begin looking at the entire crypto-space through a lens of threat mitigation and warfighting.

To better work with these members of Congress who remain skeptical, due to some very legitimate concerns, the industry must better harness and enlist the power of blockchain analytics and intelligence tools that focus on directly addressing their concerns. The crypto lobby plays a crucial role in this landscape, advocating for clear and balanced regulations that promote industry growth while ensuring national security. However, these advocates must also address malicious actors' potential misuse of cryptocurrencies, including rogue regimes, terrorists, and other criminal entities. The rise of cryptocurrencies has also led to increased foreign influence in the crypto industry. For instance, countries like China and Russia have shown considerable interest in blockchain technology, creating state-backed versions of Web3, an internet infrastructure that runs on blockchain. They've also launched major international projects to control the global market for blockchain technology.

The crypto lobby must address this growing foreign influence head-on. It should advocate for policies that protect the sovereignty and security of the crypto industry in the United States, ensuring that foreign entities cannot manipulate or control the market. The financial sector plays a significant role in modern warfare, with cryptocurrencies becoming a pivotal tool for state actors. The military's innovation office, the Defense Advanced Research Projects Agency (DARPA), is launching a comprehensive review of cryptocurrencies to assess threats to national security and law enforcement posed by the rise of digital assets. The agency will develop tools to provide the Pentagon with a granular view of crypto markets' inner workings, assisting authorities in combating illicit uses of digital assets. As such, the crypto lobby must acknowledge this reality and advocate for policies that protect the financial sector from adversarial actions.

The crypto lobby must also confront the illicit use of cryptocurrencies in any comprehensive bills they push. This includes money laundering, terrorist financing, and the evasion of sanctions. Advocates must push for regulatory measures that prevent misuse while ensuring that legitimate users and businesses can operate freely and securely. If the industry doesn't address it, then someone else will. Transparency is a crucial aspect of ensuring national security in the crypto industry. The crypto lobby must advocate for regulations that promote transparency in transactions, making it harder for bad actors to misuse cryptocurrencies. This includes pushing for blockchain technology, which provides a public, transparent ledger of all transactions. Decentralized exchanges (DEXs) are a vital area of concern for national security. While DEXs offer numerous benefits, including increased privacy and reduced reliance on centralized authorities, they pose significant risks.

The crypto lobby must address these risks, advocating for regulations that ensure the security and integrity of DEXs without stifling innovation. The crypto lobby should advocate for responsible innovation in the digital asset space. This includes promoting best practices for security and privacy and pushing for regulations that foster innovation while protecting users and the broader economy. Navigating the complex landscape of regulatory politics, the crypto lobby must confront these concerns head-on by ceasing to defend bad actors and instead focusing on addressing the national security risks associated with cryptocurrencies. The crypto lobby's advocacy for clear and balanced regulations promotes industry growth while ensuring national security.

However, it is equally essential for these advocates to acknowledge and address the potential misuse of cryptocurrencies by malicious actors, including rogue regimes, terrorists, and other criminal entities. The blockchain industry and the crypto lobby have a vital role to play in safeguarding national security in the context of digital assets. To secure a prosperous future for the crypto industry, the crypto lobby must face the challenges head-on and advocate for robust and balanced regulations. The crypto lobby must also abandon any defense of bad actors and instead focus on promoting policies that safeguard national security, foster transparency, and encourage responsible innovation.

The crypto lobby can (and should) play a pivotal role in shaping the future of the crypto industry, ensuring its continuous growth and success while effectively mitigating the risks to national security. The crypto lobby must recognize the need for policies protecting the financial sector from adversarial actions. To combat illicit uses of digital assets, the crypto lobby should support the development of tools that provide the authorities with a comprehensive understanding of crypto markets. This will enable them to effectively counter money laundering, terrorist financing, and sanctions evasion. While Web3 disrupts finance, data, and governance itself, these risks will remain and will likely grow more significant. We can't allow the adversaries of American blockchain innovation to succeed due to a false sense of pride and moral superiority of some on the fringes of crypto-Twitter.