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This article was first published on TurkishNYR
Over the past few years, blockchain has come to be regarded as one of the most transformative technologies out there, however, it is also exposing some very real national security risks.
As governments start getting on board with blockchain and digital assets, security experts emphasize the need for blockchain national security, warning that almost every single crypto transaction is visible to the public including the payments being made by defense contractors and aid agencies.
This level of transparency combined with the misuse by criminals and hostile states, has turned blockchain into one of those double-edged swords, improving auditability while still exposing sensitive financial information to those who would seek to cause harm.
As it stands; there is a rise in terrorists, cybercriminals and sanctioned regimes using blockchain to raise funds and evade controls.
Blockchain Transparency vs. Espionage: The Trade-Off
Blockchain’s open ledger means every single transaction is visible on public blockchains like Bitcoin and Ethereum. While that level of transparency is what is building trust in the system; it also unfortunately undermines national security.
For example; a hostile intelligence analyst can monitor intelligence ledgers to see if they can track payments between a US defense contractor and its suppliers; revealing strategic partnerships without hacking any network.
Journalists and human rights activists who have turned to crypto for anonymity also find themselves at risk since every single one of their transfers is permanently visible to anyone with internet access.
Josh Hawkins a policy expert has gone on record saying that blockchain’s openness “has become a veritable goldmine for adversarial governments and other bad actors”. He notes that even legitimate funds like NGO grants, payrolls, or NGO aid can give away organizational priorities and operational footprints when recorded on-chain.
In effect, blockchain fosters a digital ecosystem where competitive intelligence, surveillance and targeting are easier than ever. Every single public transaction is now a potential intelligence clue.
Defense contractors and critical infrastructure firms now have to worry that even routine crypto payments could give away their supply chain details and budgets to hostile power.
This transparency issue has led some experts to call for privacy-preserving blockchain designs (like zero-knowledge proofs) that hide the details of any transactions while still allowing for compliance audits.
While blockchain does offer some level of transparency, it can also compromise secrecy and competitive advantage which is a key national security concern.
Illicit Finance: Sanctions Evasion and Ransomware
Another main blockchain national security worry is the use of blockchain for illicit finance. Criminals, terrorist groups, and nation-state adversaries are now using cryptocurrencies to move money around covertly.
The US Treasury reported that fraudsters, ransomware gangs and even sanctioned states like North Korea, Russia and Iran are all now turning to digital assets to transfer and conceal funds. These actors can easily skirt capital controls and avoid traditional banking oversight by just hopping on to an unregulated crypto exchange.
Take the case of the North Korean “Lazarus Group”; they have run a string of high-profile hacks on crypto platforms; stealing vast sums to fund their weapons programs and evade sanctions.
Based on reports; Chainalysis estimate shows that North Korea stole roughly $660 million in 2023 and $1.34 billion in 2024 via crypto hacks. They then launder these proceeds through mixers and offshore services which makes it almost impossible to detect.
Similarly in Iran, state-linked entities have been operating local exchanges (like Nobitex) to convert crypto into hard currency which they then use to finance their missile development, threatening blockchain national security.
Russia has also taken to crypto to get around US sanctions. In 2025, TRM Labs had found that a Russia-linked stablecoin (a token pegged to the ruble) was handling a huge $72 billion in transactions, largely as a way to evade US financial sanctions.
Centralized exchanges in Russia and Iran – Garantex and Nobitex; accounted for most inflows to sanctioned addresses. In response; the US and its allies have slapped sanctions on people and wallets tied to these networks; for example, OFAC designated dozens of crypto addresses linked to Russian cyber-crooks.
Hence, policymakers are taking blockchain’s role in state-sponsored illicit finance seriously, and with good reason.
Ransomware is another blockchain national security problem. When hospitals or utilities get hacked, the criminals behind the attack demand Bitcoin payments. Once those payments are made, the funds often flow into privacy mixers so their origin is hard to track. Security agencies report tens of millions in crypto ransom has been paid out to groups like DarkSide and Conti.
As one federal advisory puts it, cryptocurrencies show up all over the place in tricky cybercrime cases, especially the ones with state-backed bad actors. The transparency of blockchain can help trace flows, but the global, anonymous nature of crypto makes enforcing any sort of rules complex, increasing blockchain national security concerns.
Terrorism Financing and International Crime
Blockchain has also attracted the attention of terrorist financing. Now, while traditional money channels like cash and hawala networks remain primary, a growing number of them are also taking crypto donations. TRM Labs has been tracking this and found numerous cases where ISIS and Hamas affiliates have used crypto.
For instance; Islamic State-Khorasan Province (ISKP) in Afghanistan carried out a Moscow attack partially funded by crypto in 2024.
Fundraising campaigns (via social media and crypto wallets) are channeling stablecoins into Gaza to support groups like Hamas’s affiliate GazaNow. Even after Israel’s crackdown; Hamas-linked entities are still raking in tens of thousands of dollars in crypto donations.
Stablecoins are particularly favored among terror financiers because they are easy to transfer and don’t have any volatility. Analysts say that even though some are interested in privacy coins like Monero, terrorist organizations are almost exclusively using stablecoins to fund operations.
The FATF (Financial Action Task Force) has flagged this trend and is advising governments to treat crypto terrorism financing as a serious threat to blockchain national security on a par with other financial crimes.
These examples make it clear that blockchain national security involves banking crime and money laundering as well as counter-terrorism.
Authorities are doing some work to improve blockchain analytics to identify and freeze illicit funds, but the reality is that the borderless nature of crypto needs international cooperation which is not so easy in a world where regulations are fragmented.
Supply-Chain and Infrastructure Vulnerabilities
Beyond illicit finance, blockchain national security concerns are also raised about hardware and infrastructure. The global Bitcoin mining industry is totally reliant on specialized hardware like ASIC chips which are mostly made in China.
Industry alliance has been warning that the fact that miners are reliant on Chinese firms is a national security risk.
A US commerce investigation in 2025 noted that the concentration of mining equipment production in China could let foreign rivals disrupt or manipulate the Bitcoin network. For example, if the US were to ban Chinese ASICs, US miners would struggle to keep up and the Bitcoin network would be vulnerable to 51% attacks if control shifted to a single country.
Recent policy discussions have begun to treat Bitcoin mining as a vital infrastructure issue. A number of experts have argued that the US should support domestic production of mining hardware to reduce dependence on adversaries.
Notably, Congress even went so far as to consider the Deploying American Blockchains Act of 2025, a bill aimed at boosting US blockchain capability as a strategic asset. These debates reflect an acknowledgment that blockchain’s physical supply chain (chips, servers, electricity) is a serious national security issue.
Moreover; the integration of blockchain with other critical systems could also create new security vulnerabilities. Researchers warn that linking blockchain to energy grids; telecom networks or military logistics may introduce cascading cybersecurity risks.
For example, if a blockchain ledger is being used in 5G infrastructure or power distribution; a coordinated hack on the ledger could bring about a whole cascade of failures.
As a result; governments need to take a close look at the cybersecurity of any blockchain platform being used in sensitive applications, from defense communications to financial systems; to properly address blockchain national security concerns.
Smart Contract and Network Security Flaws
The software that runs on blockchains and smart contracts is not foolproof, unfortunately. There are high-profile cases where hackers have been able to steal hundreds of millions of dollars and; in some cases, even threaten national security indirectly.
The North Korean Lazarus group, for instance, spotted a weakness in crypto bridges and exploited it. In 2022; they hacked the Ronin network (a bridge for the Axie Infinity game) and siphoned $600 million by compromising validator nodes; with similar attacks on Harmony and Horizon bridges netting $100M and $100M respectively.
These cyber-heists not only lined the pockets of rogue regimes but also badly damaged trust in blockchain systems.
Smaller networks are also vulnerable. A 51% attack (where one actor controls most mining power) can allow transactions to be reversed or transfers blocked. While such an attack on Bitcoin is still prohibitively expensive; smaller proof-of-work chains (like Ethereum Classic or some proof-of-stake networks) have suffered double-spend attacks.
Furthermore, software bugs in smart contracts are constantly causing problems. The 2022 collapse of TerraUSD, a software issue; wiped out $40+ billion and drew global regulatory attention. Incidents like these show that coding errors or poor incentives can have far-reaching national impacts.
Analysts are also warning about quantum computing which could potentially break the cryptography that secures blockchains. The NSA and other agencies are already working on “post-quantum” cryptography for critical systems in case this happens.
If an adversary gets a quantum computer first; they might be able to start stealing funds or forging transactions on existing blockchains in the future.
As a result; governments need to start supporting research into quantum-resistant blockchains in order to stay one step ahead of this threat.
Policy Responses and Expert Recommendations
Governments are not ignoring these blockchain national security issues, the US has put a big emphasis on supporting blockchain innovation while also taking steps to prevent its misuse.
The 2025 National Security Strategy and subsequent executive orders have been clear about this. Treasury reports and congressional acts have also been pushing for tech-neutral, risk-based frameworks for AML/CFT that make use of blockchain analytics and digital identity tools.
The GENIUS Act report (March 2026) urged lawmakers to get on with it and clarify the obligations of exchanges and DeFi protocols rather than waiting for everything to be perfect before acting.
Experts are warning that crypto exchanges, custodial wallets and mining operations should be treated as vital infrastructure with mandatory security checks and constant monitoring.
Policymakers are also being urged to get law enforcement and judiciary up to speed on crypto-fraud; and to update sanctions and KYC rules for the digital asset era.
International cooperation is vital. A decentralized ledger respects no borders; so global coordination (via the UN, FATF, etc.) is needed to track illicit flows and standardize crypto rules.
Conclusion
In a nutshell, experts are saying that cryptocurrencies bring up blockchain national security worries that can’t just be waved away. They are advocating a balanced approach: leverage blockchain’s benefits (traceability, resilience, new finance); while building privacy and security.
This includes investing in new privacy-preserving blockchain tech (like zero-knowledge proofs); improving anti-money-laundering compliance, and expanding blockchain forensics in intelligence agencies.
Policymakers and businesses must stay and be adaptable; because the globalized, borderless nature of blockchain creates both innovation opportunities and serious vulnerabilities.
Glossary
Blockchain: A secure, decentralized ledger; where all transactions are recorded in blocks that are connected to each other. Bitcoin and Ethereum are two well-known blockchains that allow people to transfer value around without needing a central authority.
Cryptocurrency: Digital assets (like Bitcoin) that use blockchain technology to do safe; decentralized transactions.
Sanctions Evasion: The act of using financial tools (like cryptocurrency) to get around economic sanctions imposed on a country or entity by governments.
Stablecoin: A type of cryptocurrency designed to keep a steady value (usually pegged to a fiat currency).
Ransomware: A type of cyber attack where hackers encrypt a victim’s data and then demand a cryptocurrency payment to give the decryption key.
Zero-Knowledge Proof (ZKP): A way of proving that a transaction is valid without actually revealing details.
Frequently Asked Questions About Blockchain National Security
Why is blockchain national security a concern?
Blockchain’s decentralized; pseudonymous nature challenges traditional state controls over finance. Blockchain lets illicit actors (sanctioned countries, criminals and terrorists) move money across borders without going through banks. The fact that everything on the blockchain is out in the public domain can end up exposing sensitive defense and infrastructure information to the wrong people.
How do terrorists take advantage of cryptocurrency without getting caught?
Terrorist groups can raise funds by asking for crypto donations; usually in stablecoins. They then use mixers and unregulated exchanges to launder the funds, making it hard to trace.
Can blockchain be hacked like other computer systems?
Yes; Blockchain networks and smart contracts are software at the end of the day, and they can have bugs or be targeted by hackers.
Does using cryptocurrencies guarantee privacy from governments?
No, it doesn’t. Cryptocurrencies are pseudonymous; but the permanent record of all transactions on a public blockchain gives investigators all they need to start tracing flows.
References
Disclaimer: This article is just for information purposes and is not meant to be taken as financial or security advice or anything like that.
