By Major General Dilawar Singh
Cryptocurrencies, commanding a $3.5 trillion market cap and 300 million users as of July 2025, are transforming global finance. Yet, their potential as a tool for warfare in economic, cyber, and hybrid domains demands urgent scrutiny. From enabling sanctions evasion to fueling cyberattacks, digital assets like Bitcoin and Monero empower state and non-state actors to disrupt adversaries with unprecedented agility. Simultaneously, their capacity for financial inclusion and innovation offers a counterpoint. “Cryptocurrencies can destabilize economies or democratize finance, depending on their governance,” warns Chainalysis CEO Michael Gronager. A robust global policy framework is essential to curb misuse while harnessing crypto’s potential, balancing geopolitical tensions, economic risks, and ethical imperatives. Cryptocurrencies facilitate economic warfare by bypassing traditional financial systems. Sanctioned nations exploit their decentralized nature to evade restrictions. Iran, generating $1 billion annually through Bitcoin mining with cheap hydroelectric power, funds oil exports and military operations, circumventing U.S. sanctions. Venezuela similarly trades crypto for goods, undermining SWIFT controls. “Crypto provides a shadow economy beyond Western oversight,” notes Dr. Anasuya Ray of Georgetown University. Hostile actors can also destabilize markets by leveraging crypto’s volatility, with Bitcoin’s 10% daily swings making it susceptible. A strategic sell-off of China’s 190,000 BTC, seized from the 2019 PlusToken scam, could crash prices, devastating nations like El Salvador, where Bitcoin constitutes 20% of GDP, or Bhutan, with $1.28 billion in holdings equating to 27.9% of GDP. Such tactics echo historical oil market manipulations but operate with crypto’s borderless efficiency. In cyber warfare, cryptocurrencies are a linchpin for state-sponsored attacks. North Korea’s Lazarus Group has stolen $1.7 billion in crypto since 2017, including $600 million from Axie Infinity in 2022, funding nuclear programs and cyberattacks on global infrastructure. “Crypto’s pseudonymity makes it ideal for ransomware,” cautions Anne Neuberger, U.S. Deputy National Security Advisor. The 2024 WazirX hack in India, costing $230 million, exposed exchange vulnerabilities, making them prime targets for actors seeking to destabilize economies with high crypto adoption, such as India’s $300 billion market. Smaller blockchains risk 51% attacks, where adversaries could disrupt decentralized systems, like Pakistan’s planned blockchain governance, causing chaos in financial or electoral processes. Hybrid warfare leverages crypto for disinformation and proxy funding. Its volatility amplifies X-driven false narratives, such as fabricated regulatory crackdowns, which could trigger panic sells and harm crypto-reliant economies like Bhutan’s tourism payment system. Crypto also enables anonymous funding of proxies, including militias or hacktivists, without traceable fiat transfers. “Bitcoin’s anonymity allows states to fund insurgencies with deniability,” observes Dr. Lydia Khalil of the RAND Corporation. Russia could use crypto to support separatists in a rival nation. Meanwhile, the U.S., with its Strategic Bitcoin Reserve under President Trump, could manipulate markets to weaken adversaries, akin to currency wars but with digital assets. Crypto’s strategic advantages in warfare are evident: anonymity via privacy coins like Monero obscures illicit funding; accessibility enables rapid, borderless transfers; and market leverage allows economic disruption. However, these strengths expose vulnerabilities. “A single hack or market crash could cripple a crypto-reliant economy,” warns IMF economist Gita Gopinath. Nations with reserves, like Bhutan or El Salvador, risk financial collapse from volatility. Cybersecurity weaknesses, as seen in WazirX, threaten stability, while disinformation fuels social unrest. Geopolitically, crypto-dependent states face manipulation by powers like the U.S. or China, which hold significant Bitcoin reserves. A global policy framework is critical to counter crypto’s weaponization. The G20, building on its 2023 crypto roadmap, should establish a tiered framework by 2027, mandating KYC/AML standards while respecting sovereignty. The Financial Action Task Force must deploy AI-driven transaction monitoring to reduce illicit use to below 0.1%; Chainalysis estimates only 0.2-0.5% of transactions, or $1-2 billion, currently fund crime. The International Organization of Securities Commissions should mandate multi-signature wallets and $2 billion insurance funds for exchanges to prevent hacks. The World Economic Forum can host neutral dialogues to align pro-crypto nations, like the U.S. and El Salvador, with CBDC-focused states, such as China and India, reducing geopolitical friction. The UN should integrate crypto into Sustainable Development Goals, targeting 100 million unbanked users by 2030 through stablecoin remittances. Environmental concerns, with Bitcoin’s 120 TWh annual energy use, demand action. The World Bank should fund 2 GW of renewable mining by 2028, scaling Iceland’s geothermal model, while incentivizing proof-of-stake systems like Ethereum, which cut energy use by 99.95%. The Bank for International Settlements must research quantum-resistant blockchains, as quantum computing could break encryption by 2035. The IMF should cap crypto reserves at 5-10% of GDP to mitigate volatility, ensuring economic resilience. Cryptocurrencies are a dual force, enabling warfare through sanctions evasion, cyberattacks, and hybrid tactics while offering inclusion and innovation. A coordinated framework, blending G20 regulation, FATF enforcement, and WEF diplomacy, can neutralize risks while unlocking benefits. By acting decisively, the global community can ensure cryptocurrencies drive progress, not conflict, shaping a resilient digital economy by 2030. [Major General Dr Dilawar Singh, a Ph.D. with multiple postgraduate degrees, is a seasoned expert with over four decades of experience in military policy formulation and counter-terrorism. He has been the National Director General in the Government of India. With extensive multinational exposure at the policy level, he is the Senior Vice President of the Global Economist Forum, AO, ECOSOC, United Nations. He is serving on numerous corporate boards. He has been regularly contributing deep insights into geostrategy, global economics, military affairs, sports, emerging technologies, and corporate governance.]