Why Governments Care About Crypto

What you'll learn

• Money Is Power
• 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.