National Security Implications of Virtual Currency

[Joshua]

http://www.rand.org/pubs/research_reports/RR1231.html
Key Findings

Non-State Actors Can Use VCs to Disrupt Sovereignty and Increase Political and/or Economic Power, but Unlikely to Use Established VC; Many Challenges Posed by Creation of VCs

- VC deployments are attractive in developing countries and in countries undergoing internal turmoil, where the existing financial infrastructure is either insufficient or weakened.
- The rapid deployment of a VC over a large geographic area would likely be less complicated than deploying more common currencies, such as those based on commodities or paper-based currencies.
- A non-state actor's VC (including Bitcoin-like currencies) would likely be vulnerable to cyber attack by a sophisticated adversary; more generally, creating new, usable yet reliable VC may pose great challenges, particularly for a non-state actor without technical sophistication.
- Promoting adoption of VCs among population is difficult due to newness, lack of legitimacy, and familiarity with physical tangibility of currency.
- Deployment of a VC by non-state actors, such terrorist organizations, insurgent groups, drug cartels, and other criminal organizations, would be easier if supported by a nation-state with advanced cyber expertise.
- Despite numerous hurdles, trends indicate a future in which VCs could be deployed by non-state actors or other organizations.

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