Defence alert: Crypto is turning into a geopolitical weapon
It’s a tech innovation that the US under Trump seems bent on legitimizing. As crypto can be used to fund illicit activities and also be weaponized to destabilize financial systems, India needs a digital defence apparatus to guard against threats.
"I am not a fan of Bitcoin and other cryptocurrencies… Unregulated crypto assets can facilitate unlawful behaviour." That was Donald Trump in 2019, when he still voiced concerns shared by central bankers, International Monetary Fund (IMF) economists and financial crime experts across the world. The consensus was clear: crypto, while technologically innovative, lacked both intrinsic value and sovereign backing, and undermined anti-money laundering regimes as well as monetary integrity.
Fast forward to 2025. Better educated perhaps by the America crypto lobby’s campaign cheques and the sweat equity gifted to his family, Trump, now US president again, recently signed Executive Order 14178.
A stroke of the pen dismantled many of the regulatory guard-rails once deemed essential. Not long after, the Trump family entered the crypto business. One of their earliest strategic partners was Pakistan, a state associated with cross-border terrorism, shady finances and furtive fund diversion.
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What should India make of a superpower whose political leaders launch private currencies? Or of a country where former convicts are rehabilitated as strategic advisors to sovereign crypto councils? Are we witnessing a global power in search of infinite minting rights without democratic oversight but with the full cover of plausible deniability?
Changpeng Zhao, former CEO of Binance, pleaded guilty to serious anti-money laundering failures, spent time in US custody and paid $4.3 billion for a settlement. His crypto exchange facilitated transactions for sanctioned groups like Hamas—flows that would never get past a regulated banking system.
The Binance blow-up should have ended his financial career. Instead, he now advises Pakistan’s official crypto task force. Justin Sun, whose firm invested $30 million in Trump-linked World Liberty Financial, was under investigation by the US Securities and Exchange Commission for civil fraud. Today, he is a front-row guest at US political fund-raisers.
Are crypto dealings the new way to buy influence in the US? This seems like a gateway through which otherwise ineligible actors—be it individuals, regimes or rogue states—are quietly admitted into the global financial order, now that the need for institutional legitimacy appears to be receding behind the opacity that once resulted in exclusion.
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It’s a return to Cold War-style shadow financing, but with the support of blockchains instead of banks. So much for the superpower that lectures the world on clean governance. When financial opacity is rebranded as innovation, geopolitics takes on a new form we should all be wary of.
The IMF and World Bank have been vocal in their concerns. The IMF has warned that widespread adoption of private cryptocurrencies threatens monetary sovereignty, enables illicit flows and undermines capital controls, especially in emerging markets. We saw disruptions in El Salvador, Nigeria, and Lebanon, where crypto experiments coincided with capital volatility and institutional erosion.
Terror finance remains an enduring threat to global security. The Financial Action Task Force (FATF) has repeatedly highlighted how terrorist groups exploit crypto to bypass formal banking oversight. Yet, Pakistan has FATF clearance. For a country like India—on the front-line of cross-border terrorism—this is a real risk. Crypto has operationalized what could be described as ‘eHawala’: borderless transfers in real time that can stay hidden.
A sovereign nation should not let private entities mint currency, however trendy or popular it proves. To its credit, the Reserve Bank of India saw this coming. Its resistance to private cryptocurrency is neither timidity nor technophobia—it is an assertion of monetary sovereignty. In today’s world, capital flows can be weaponized. It is therefore a matter of national security to ensure such weapons are not aimed at us.
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Yet, the pressure to capitulate is mounting. Global crypto platforms, freshly repackaged as fintech innovations, have been pushing for softer regulation. In India, domestic actors have lobbied against India’s high tax on crypto gains by arguing that crypto capital must be stopped from fleeing offshore. In matters of financial security, arguing that crypto should remain unchecked because conventional checks aren’t flawless is not just illogical, but dangerously juvenile. Even if the US exerts diplomatic pressure, India mustn’t oblige.
Instead, India should put systems in place for crypto deterrence. Cutting-edge surveillance tools, forensic finance capabilities and offensive digital arsenals could be deployed against adversarial scenarios of crypto being used as a Trojan horse to destabilize our financial system. Just as strategic weapons are kept discreet, so must this.
The future of finance may well be digital. But that future must be guided by sovereign plans, not determined by offshore hype or patronage games. In the crypto age, our sovereignty must be defended with the same strategic intent that we apply to borders, seas, airspace and cyberspace.
Crypto is now a geopolitical instrument and potentially a vector of strategic harm. It needs to be viewed as a weaponizable tool, even as we secure our financial architecture from any threat it may pose. This is no longer a matter for committees to discuss. It is a political decision—one that cannot be deferred without consequences.
The author is a corporate advisor and author of ‘Family and Dhanda’
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