July 11, 2019 | Press Release

U.S. Adversaries Aim to Use Cryptocurrencies and Blockchain Technology to Undermine U.S. Sanctions: New FDD Report

July 11, 2019 | Press Release

U.S. Adversaries Aim to Use Cryptocurrencies and Blockchain Technology to Undermine U.S. Sanctions: New FDD Report

(Washington, DC, July 11, 2019) – A new Foundation for Defense of Democracies (FDD) report issued today examines how four U.S. adversaries – Russia, Iran, China and Venezuela – are trying to use cryptocurrencies and blockchain technology to evade and undermine U.S. sanctions, with the ultimate goal of operating entire economies outside the U.S.-led global financial system.

In “Crypto Rogues: U.S. State Adversaries Seeking Blockchain Sanctions Resistance,” authors Yaya J. Fanusie and Trevor Logan write that U.S. adversaries have been unable to conduct significant international commerce without moving through the pipes of the U.S.-led global financial system. That may change, however, as the four have initiated blockchain technology experiments that their leaders paint as tools to offset U.S. financial coercive power and increase sanctions resistance.

“America’s adversaries see blockchain technology as a key component of their efforts to counter U.S. financial power,” says Fanusie, an adjunct fellow at FDD’s Center on Economic and Financial Power (CEFP and former CIA analyst. “And the U.S. position of influence is not necessarily permanent.”

The authors find that:

  • Venezuela’s national cryptocurrency experiment under the Maduro regime has been a debacle, as the petro coin was a propaganda effort more than a technical or financial accomplishment. The impact of U.S. sanctions and the Maduro regime’s own illegitimacy ensured the coin’s failure. However, the petro experiment served as a case study for other regimes to learn what not to do in deploying a blockchain sanctions resistance plan.
  • Russian financial institutions are launching multiple blockchain technology projects to float corporate bonds and hold digital assets in new depository platforms. A crypto-ruble is unlikely in the short term, but the Kremlin is looking to develop a digital currency that could be used for trade with regional partners and like-minded governments outside the SWIFT financial messaging system.
  • Iran’s central bank is highly motivated to develop an alternative to SWIFT, especially after Washington withdrew from the Iran nuclear deal. Tehran is investing in blockchain pilot projects and promoting blockchain technology education at the university level. Iran’s approach is gradual, with several blockchain pilots in partnership with Iran’s private tech sector in the works.
  • China is less threatened by U.S. sanctions than other adversaries, but displacing U.S. influence in the global financial system is a national priority. China’s central bank is devoting significant resources and expertise to blockchain research and digital currency development. China’s buy-in, if it involved moving its trade onto a blockchain platform outside the conventional system, would be a game-changer.

“Technology has created a potential pathway to alternative financial value transfer systems outside of U.S. control,” Logan says. “The target timeline may be more than a decade away, but these actors are developing the building blocks now.”

“Our adversaries seek to weaken U.S. economic influence, displace the U.S.-led financial system, and lessen dependency on the U.S. dollar and Western institutions through the establishment of alternate platforms, commercial arrangements, and even the potential of an alliance of rogue crypto networks,” said CEFP Chairman Juan C. Zarate.

FDD has long been at the forefront of research into potential illicit uses of cryptocurrencies and how blockchain technology will impact U.S. national security. Last year, FDD published the first-ever public domain analysis of how digital currency is laundered around the world.

The authors provide eight specific recommendations the Trump administration and Congress can take for the United States to remain ahead of its adversaries in the realm of cryptocurrencies and blockchain technology and to maintain the integrity of the global financial system.

About FDD

The Foundation for Defense of Democracies (FDD) is a Washington, DC-based nonpartisan policy institute focusing on national security and foreign policy. Visit our website at fdd.org and connect with us on TwitterFacebook, and YouTube.

About FDD’s Center on Economic and Financial Power (CEFP)

CEFP studies national economic security, with a focus on how the U.S. can leverage its economic and financial power to achieve its national security objectives. CEFP promotes greater understanding of how the U.S. government can employ its economic and financial authorities to best counter its adversaries.

About FDD’s Center on Cyber and Technology Innovation (CCTI)

CCTI seeks to advance U.S. prosperity and security through technology innovation while countering cyber threats that seek to diminish it. The Center promotes a greater understanding within the U.S. government, private sector, and allied countries of the threats and opportunities to national security posed by the rapidly expanding technological environment.


Blockchain and Digital Currencies China Cyber Cyber-Enabled Economic Warfare Iran Russia Sanctions and Illicit Finance