Why Governments Care About Crypto

A geopolitical lens on cryptocurrency: why nations, central banks, and treasury departments treat crypto as a strategic concern, with concrete cases from China, the United States, El Salvador, Russia, Iran, and North Korea.

25 min · beginner · part of The Foundation: Why Crypto Exists

Money Is Power

Most introductions to cryptocurrency focus on individual users: how to buy it, store it, use it, profit from it. That focus misses something just as important. Cryptocurrency is not only a technology that ordinary people can adopt or ignore. It is a technology that governments must respond to, because money itself is one of the central instruments of state power. For roughly 350 years, since the founding of the Bank of England in 1694, the dominant model of money has been state-issued. A government grants a central bank the monopoly on currency issuance. The central bank manages the money supply through interest rates and open market operations. Commercial banks intermediate the system, holding accounts, processing payments, and extending credit subject to regulatory oversight. The state taxes income flowing through this system, sanctions actors it disapproves of, and uses control over banking access as both a carrot and a stick in foreign policy. Cryptocurrency, in its full form, threatens every layer of this arrangement. A digital bearer asset that anyone can hold, transfer globally without permission, and use for payments outside the regulated banking system is, by definition, a partial competitor to state money. This does not mean governments are uniformly hostile to crypto. The actual government response has varied wildly: outright prohibition (China), strategic accumulation (the United States in 2025), legal tender adoption (El Salvador), tolerance with regulation (most of Europe), and active sanctions evasion (Russia, Iran, North Korea). This lesson is not a survey of every government action. The Module 26 timeline covers the chronology, and Module 25 covers the U.S. policy direction in detail. What this lesson does is provide the conceptual frame: why every government in the world has had to develop a position on cryptocurrency, what motivates the different positions, and why citizens, businesses, and financial systems all have stakes in how this contest plays out. Once you understand the geopolitical lens, every news headline about crypto policy makes more sense.

Also in this lesson

China: The Largest Anti-Crypto Action in History
The United States Pivot: From Suspicion to Strategic Reserve
El Salvador: Why Legal Tender Mattered
Russia, Iran, North Korea: Sanctions and Illicit Use
Why Central Banks Fight Crypto: Monetary Sovereignty
Why Citizens, Businesses, and Systems All Have Stakes
For Deeper Reading

Key terms

Monetary sovereignty: The capacity of a state to control its own currency and monetary policy. Cryptocurrency, especially dollar-denominated stablecoins, can erode monetary sovereignty by providing citizens with access to alternative money the central bank cannot manage.
Strategic Bitcoin Reserve: A U.S. government holding of Bitcoin established by Executive Order 14233 on March 6, 2025. Designates seized Bitcoin (over 200,000 BTC) as a strategic reserve, conceptually parallel to gold or strategic petroleum reserves.
Central bank digital currency (CBDC): A state-issued digital currency, typically intended to provide the convenience of a stablecoin while remaining under central bank control. Over 130 countries are studying or piloting CBDCs in 2026; the U.S. has explicitly opposed a Federal Reserve retail CBDC.
Capital controls: Government restrictions on the cross-border movement of money, typically including limits on foreign currency conversion. China maintains strict capital controls; one motivation for its 2021 crypto ban was preventing crypto-based capital flight.
OFAC (Office of Foreign Assets Control): The U.S. Treasury department responsible for enforcing economic and trade sanctions. OFAC has sanctioned numerous cryptocurrency wallets, exchanges, and protocols (including Tornado Cash in August 2022) associated with sanctioned actors.
Lazarus Group: A state-sponsored hacking unit operating on behalf of North Korea, responsible for an estimated $6.75 billion in cryptocurrency theft between 2017 and early 2026 per TRM Labs. Proceeds are linked to DPRK nuclear and ballistic missile programs.
Dollarization: The spontaneous adoption of the U.S. dollar (or another foreign currency) as a parallel or replacement medium of exchange when domestic currency confidence collapses. Stablecoins enable a new digital form of dollarization in emerging markets.
Bitcoin Law (El Salvador): Legislation passed June 9, 2021, taking effect September 7, 2021, that made Bitcoin legal tender in El Salvador alongside the U.S. dollar. The first national adoption of cryptocurrency as legal tender. Modified in early 2025 under IMF lending conditions.
Cambridge Bitcoin Electricity Consumption Index: A research project tracking global Bitcoin mining hashrate distribution by country. Documented Chinese hashrate share dropping from above 65 percent in 2020 to functionally zero in official data following the May to September 2021 ban.
GENIUS Act: U.S. federal stablecoin legislation enacted July 18, 2025. Provides a federal regulatory framework for U.S. dollar-denominated stablecoins. A signal of the broader U.S. policy shift toward accommodating cryptocurrency innovation under structured oversight.
Sanctions evasion: The use of financial channels (including cryptocurrency) by sanctioned states or individuals to circumvent restrictions. Russia, Iran, and North Korea have all used crypto to varying degrees for sanctioned activity, driving major Western enforcement attention.
Bank for International Settlements (BIS): An international institution headquartered in Basel, Switzerland that serves as the bank for central banks. Has been institutionally critical of permissionless cryptocurrency since at least 2018 while supporting CBDC development.

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Educational only — not financial advice.