Examining the National Security Implications of Cryptocurrencies

Abstract

The emergence of block-chain technology in the form known as “cryptocurrency” is an evolution of the global monetary system that is here to stay. The rise of this new variant of distributed ledger technology has been dismissed by some who believe it offers no real value and denigrated by others who believe its prevalence raises national security concerns. Many of these concerns stem from the common misperception that all cryptocurrencies have cryptographic properties which render them anonymous and can be used by terrorists and other undesirables to fund their criminal enterprises. After discussing the basic technical components of blockchain technology, this article distinguishes that, contrary to popular belief, most cryptocurrencies are not what could be classified as “anonymous,” but are instead “pseudonymous.” These pseudonymous cryptocurrencies can actually enhance law enforcement’s ability to track criminal users’ financial activities. It further refines the notion that all cryptocurrencies are the same by noting that some are more anonymous than others, and some are in fact more identifiable than fiat currencies. Instead of resisting cryptocurrencies altogether, this article argues that the United States government should embrace those cryptocurrencies that are pseudonymous and should further study those which are considered anonymous.

Keywords: Cryptocurrencies, Cryptocurrency, Blockchain, Bitcoin, Pseudonymous, Privacy, National Security, Terrorism, Criminal Financing