How Nation-states Leverage Cryptocurrency

Cryptocurrency has evolved from a niche innovation to a central feature of the global financial system. As adoption has grown, so too has its relevance to national interests. Nation-states — both democratic and authoritarian — now view blockchain technology through the lens of economic strategy, sanctions resilience, innovation, and influence.

Some use cryptocurrency to circumvent restrictions and fund illicit programs. Others deploy it to increase transparency, efficiency, and inclusion in their economies. This duality makes crypto not just a financial technology, but a geopolitical tool — one that TRM maps every day.

Cryptocurrency and the new financial order

For decades, the international financial system has been governed by a set of institutions — the US dollar, SWIFT (the global messaging system that facilitates international financial transactions), and the correspondent banking network — that enable cross-border value transfer and enforce economic sanctions. Digital assets both challenge and complement that system.

Because cryptocurrency transactions occur on public blockchains, they are not dependent on traditional intermediaries. This allows nation-states to:

• Move funds across borders without direct access to US or European banking rails
• Engage in state-sponsored cybercrime or sanctions evasion
• Experiment with central bank digital currencies (CBDCs) and tokenized reserves
• Build domestic innovation ecosystems that drive fintech competitiveness

TRM’s blockchain intelligence platform enables governments, regulators, and private sector partners to understand these behaviors, identify risk, and distinguish legitimate experimentation from illicit activity.

Adversarial use: Exploiting transparency

While blockchain ledgers are transparent, they are also borderless. Adversarial regimes have exploited that property of blockchain technology to conduct operations outside the traditional financial system. For example:

• North Korean hacks on exchanges, decentralized finance (DeFi) protocols, and cross-chain bridges
• Russian sanctions evasion and fundraising using digital assets
• Iranian Bitcoin mining and cryptocurrency usage to bypass international payment restrictions

North Korea: The archetype of state-sponsored crypto-enabled crime

No nation has used cryptocurrency more aggressively for illicit ends than North Korea, or the Democratic People’s Republic of Korea (DPRK). Over the past five years, North Korean cyber units have stolen billions of dollars through hacks on exchanges, decentralized finance protocols, and cross-chain bridges — notably, the February 2025 Bybit hack.

TRM Labs’ investigations have mapped DPRK-linked wallets across multiple blockchains, revealing how stolen funds are:

1. Moved through mixers and privacy tools, such as Tornado Cash or Sinbad.io
2. Swapped across chains using bridges or DeFi protocols to obscure their origin
3. Consolidated into stablecoins — often USDT or USDC
4. Cashed out via over-the-counter (OTC) brokers and foreign exchanges in China or Southeast Asia

The proceeds of these hacks directly fund North Korea’s nuclear and ballistic missile programs. In response, global regulators have relied on blockchain intelligence to expose and disrupt these networks.

Russia: Sanctions evasion and digital resilience

Following the 2022 invasion of Ukraine, Russia faced unprecedented financial sanctions. In the wake of being cut off from SWIFT and major Western institutions, Russian entities began experimenting with cryptocurrency for cross-border trade, sanctions evasion, and wealth preservation.

TRM Labs’ data shows that while cryptocurrency has not replaced traditional finance for Russia, it has become a supplementary mechanism in several key areas:

• Cross-border settlements: Russian and Iranian intermediaries have piloted crypto-based trade to bypass the US dollar
• Fundraising: Pro-Russian groups have used digital assets to raise funds for militias and military equipment
• Mining: Russian industrial-scale mining operations convert locally generated crypto into hard currency abroad

TRM continues to track wallets, OTC brokers, and exchanges facilitating these activities. The transparency of blockchain transactions allows regulators to identify potential sanctions breaches far faster than in traditional trade finance systems.

Iran: Crypto mining and the “tokenization of evasion”

Iran has also turned to cryptocurrency to mitigate the impact of US sanctions. The government legalized Bitcoin mining in 2019 and uses the resulting digital assets to pay for imports and bypass international payment restrictions. TRM analysis shows that:

• Iran-based miners contribute a measurable percentage of global hash rate
• Locally mined Bitcoin is sold to the central bank, which then uses it for sanctioned imports
• Iranian exchanges and payment processors convert crypto proceeds into fiat currency via regional intermediaries

This model — where physical resources like energy are converted into digital assets for trade — represents a new form of sanctions circumvention. By mapping these flows, TRM provides transparency for global regulators monitoring compliance exposure and systemic risk.

Beyond evasion: Strategic innovation

Not all nation-state engagement with crypto is adversarial. Many governments view blockchain technology as an opportunity to enhance transparency, modernize payments, and stimulate growth.

The United States and Europe: Building trust infrastructure

US and EU agencies are leveraging blockchain analytics to strengthen compliance and law enforcement capacity. Programs like the Counter Ransomware Initiative (CRI) — supported by TRM Labs and other private sector partners — use blockchain intelligence to trace ransomware proceeds, share typologies, and coordinate enforcement actions across borders.

The US Treasury — through Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) — continues to refine guidance and sanctions frameworks for digital assets, ensuring that innovation and security evolve together.

Europe, under the Markets in Crypto Assets (MiCA) regulation, has implemented a harmonized licensing regime emphasizing consumer protection and market integrity. The regulation mandates robust compliance, risk management, and blockchain analytics — areas where TRM Labs’ tools support both firms and regulators.

Singapore and Japan: Public-private collaboration

Singapore’s Monetary Authority (MAS) has emerged as a model for integrated oversight and innovation. MAS leverages public-private partnerships — including collaboration with TRM — to combine regulatory clarity with technology-driven compliance.

Japan, similarly, has used blockchain intelligence to ensure exchange transparency and sanctions enforcement, particularly after high-profile hacks. Its regulatory structure demonstrates how mature compliance infrastructure can coexist with vibrant digital asset markets.

The rise of central bank digital currencies (CBDCs) and tokenized reserves

Beyond compliance, many central banks are exploring central bank digital currencies (CBDCs) as instruments of monetary modernization. While distinct from decentralized crypto, CBDCs are influenced by blockchain principles: programmability, traceability, and interoperability.

TRM Labs’ policy teams engage with central banks exploring tokenized reserves, ensuring that lessons from open blockchain tracing — particularly around anti-money laundering (AML) and countering the financing of terrorism (CFT) controls — inform sovereign digital currency design.

Blockchain intelligence as a geopolitical tool

Blockchain intelligence has become a form of economic statecraft. Governments now use it not only to detect illicit finance, but to monitor global economic flows, enforce sanctions, and secure their own systems from misuse.

TRM’s data supports these efforts by:

• Mapping illicit financial ecosystems linked to state actors
• Identifying cross-chain laundering and bridge exploitation
• Providing early warning signals for cyber-enabled sanctions evasion
• Enabling coordination across multiple jurisdictions via Beacon Network, the industry’s first real-time intelligence-sharing system that helps law enforcement, crypto exchanges, DeFi services, and stablecoin issuers stop illicit funds before they are withdrawn

Through Beacon Network, agencies in North America, Europe, and Asia exchange typologies and indicators in near real time — transforming fragmented investigations into coordinated, proactive action.

The dual-use nature of crypto infrastructure

Crypto infrastructure is dual-use: the same open networks that power legitimate innovation can also be exploited for illicit ends. The difference lies in governance, visibility, and enforcement.

When North Korea uses cryptocurrency, it does so to evade sanctions and fund weapons programs. When Singapore or the EU uses cryptocurrency, it is to modernize compliance, payments, and market supervision.

This contrast underscores why transparency and analytics are essential. The public ledger does not discriminate — but on-chain analytics, combined with off-chain intelligence, determine whether its openness strengthens safety or invites exploitation.

How blockchain analytics turns data into illicit activity deterrence

TRM’s platform brings together blockchain analytics, AI-driven risk scoring, real-world attribution, and collaborative intelligence to give policymakers and investigators a unified view of nation-state crypto activity.

Key capabilities include:

• Cross-chain attribution to track complex laundering networks across ecosystems
• Sanctions exposure analysis to assess risk in real time
• Behavioral analytics and Signatures® to identify recurring tactics used by state-sponsored actors
• Data fusion combining on-chain movement with off-chain records and open-source intelligence

The result is a living, continuously updated map of global digital finance — one that reveals where crypto innovation intersects with national power and security.

Creating accountability through transparency

In every case — from North Korea’s hacking operations to Russia’s digital trade experiments — blockchain data provides an immutable record. Unlike opaque offshore banking or shell companies, these activities can be seen, analyzed, and traced. And those on-chain insights can then be used by national security and compliance teams to take any necessary action.

This transparency transforms enforcement. Sanctions are no longer static lists — they are dynamic systems linked directly to blockchain monitoring. And financial integrity becomes measurable in code.

The path forward

How nation-states use cryptocurrency and digital assets will continue to evolve. As they have with all forms of currency, authoritarian regimes will likely seek to exploit crypto for resilience, while democratic governments will likely harness it for innovation and accountability.

TRM Labs’ role is to ensure that transparency prevails — that blockchain technology remains built on trust, not opacity.

By equipping regulators, financial institutions, and law enforcement with the intelligence they need to understand and respond to nation-state crypto activity, TRM helps strengthen both security and sovereignty in the digital age.

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Frequently asked questions (FAQs)

1. How are nation-states using cryptocurrency today?

Nation-states use cryptocurrency in different ways — some to evade sanctions or fund illicit programs, others to promote financial innovation, inclusion, or compliance modernization.

2. What role does blockchain intelligence play in national security?

Blockchain intelligence helps governments trace illicit finance, enforce sanctions, and monitor cross-border flows. It turns public blockchain data into actionable insights for compliance and security teams.

3. Why is North Korea’s use of crypto considered unique?

North Korea has used crypto more aggressively than any other state, stealing billions in digital assets via hacks. These funds directly support the country’s weapons programs, making it a key national security concern.

4. Can crypto help countries bypass international sanctions?

Yes. Countries like Russia and Iran have used cryptocurrency to conduct cross-border trade, fund state-linked activities, and access foreign currency — often outside the traditional financial system.

5. Are central bank digital currencies (CBDCs) the same as crypto?

No. While inspired by blockchain principles, CBDCs are government-issued and centrally controlled. Many central banks use blockchain analytics to design secure, transparent digital currencies.

6. How does TRM Labs support governments and regulators?

TRM Labs provides blockchain intelligence tools to trace transactions, assess sanctions risk, and detect cross-chain laundering — enabling real-time action and global collaboration through programs like Beacon Network.

7. Is crypto infrastructure inherently risky for national security?

Crypto infrastructure is dual-use. It can enable innovation or exploitation, depending on how it’s governed. Transparency and on-chain analytics are essential for managing risk and enabling trust.