Of all the policy changes introduced by the Trump administration over the last year, few have been more disruptive and auspicious than the president’s embrace of cryptocurrency. The country has seen a complete reversal from the Biden era, when a heavy-handed regulatory approach toward the industry reigned.
America is now leading the world in this innovative technology, backed by bipartisan legislation like the GENIUS Act on payment stablecoins. Congress should finish the job by passing the CLARITY Act to establish market structure rules for digital assets, giving industry the regulatory certainty to build at scale here rather than offshore.
Together, these frameworks will ensure U.S. preeminence in global capital markets and open the door wider for progress in the national security space, since U.S. blockchain leadership in the commercial space creates the talent, infrastructure and standards the Pentagon can leverage.
As more than 55 million Americans who currently own “crypto” already know, this digital currency enables a secure, easy, reliable way to move money globally. It also empowers individuals, making the financial system more accessible by reducing the role of intermediaries who limit participation, add fees and extend the time it takes to conduct transactions. Who hasn’t waited a day or so for a wire transfer to occur, only to be charged a ridiculously high fee to do so?
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Less known is the incredible engineering that makes cryptocurrency real: blockchain – a technology that provides a transparent ledger for something of value beyond just currency, such as a copyright, a professional license or a sensitive email. This tech also allows people to share such things privately with confidence, ease and accountability.
While cryptocurrency uses blockchain to enable secure financial transactions and move things of value between people, it can also be employed to advance U.S. national security. Despite piloting blockchain before with mixed results, the maturation of zero-knowledge proofs and better key management are two reasons for the military to pick up the ball again when it comes to the defense space.
The Pentagon should pursue a layered strategy: permissioned systems for classified and sensitive data, and public blockchains for applications where external verifiability and interoperability are the whole point. On the permissioned side, tamper-evident command-and-control logs, classified communications and secure conveyance of crisis information (e.g., battle plans, unit readiness reports, bomb damage assessments) belong on infrastructure DOD controls end-to-end.
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But public blockchains have a distinct role to play: anchoring document hashes for tamper-evident integrity, content authentication and counter-deepfake provenance for official communications and imagery, coalition interoperability with allies on shared neutral infrastructure, for example. Zero-knowledge proofs will increasingly let DOD bridge the two — proving facts about sensitive data without exposing the data itself.
On the business side, the Pentagon could use blockchain’s secure ledger technology to ensure the safeguarding and reliability of everything from equipment, weapons and munitions stocks to financial data, maintenance logs and contracts. This would also allow the transfer of this information to the right recipient, regardless of the information technology infrastructure they are using, allowing the department to begin breaking free of many of the IT restrictions under which they currently operate.
Further, blockchain can also be leveraged to enhance supply chain monitoring, beginning with the origin of items and continuing through their deployment, and with the overall bill of materials associated with these items. For their part, the military’s vendors should also use blockchain. An August 2020 report by PWC said that manufacturers “can use blockchain to improve the way they track parts, inform the analytics that anticipate when repairs will be needed and make maintenance processes far more efficient.”
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Walmart, for example, has utilized blockchain for years in supply chain management. More recently, JP Morgan employs a “bank-led blockchain platform” called Kinexys “for programmable payments, asset tokenization and near-real-time settlement across global markets.”
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Such a broad range of applications could significantly enhance the military’s capabilities and confidence in these domains and improve engagement with the defense industrial base, particularly at a time when China is aggressively moving forward on multiple fronts. Beijing’s actions suggest the Communist Party sees blockchain as core infrastructure for both economic statecraft and military modernization. This is another race we cannot lose.
Beyond a clear and broad set of military applications, the Pentagon could also improve administrative efficiency and empower our service members by putting sensitive personal documents, such as military service files, medical records, and birth certificates on a secure blockchain. California and other states are doing this; why can’t the Defense Department? After all, if DOD was a state, its 5.3 million service members, civilian employees and dependents give it a population greater than 27 others in the union.
The use of blockchain technology by the department is only limited by the institution’s eagerness and imagination in applying it, and the resources required to make it real. The return on investment, however, is broad, meaningful and measurable. The increased confidence alone in the integrity and security of data being stored and conveyed is compelling. Solid next steps in this direction might begin with establishing a blockchain working group, drafting a strategy document and even starting a Chief Digital and Artificial Intelligence Office (CDAO)-led pilot program.
As the Pentagon ups its game when it comes to innovative technologies such as artificial intelligence, autonomous systems and robotics, the use of blockchain should also be part of this mix. Given the important role it can play in advancing the military’s effectiveness, and thus our national security, it is important that blockchain be leveraged in ways that ensure the preeminence of our American armed forces and our supply chains for decades to come.
