Crypto Is The Newest Weapon, India Must Treat It As One
There is a growing sense of inevitability being crafted around cryptocurrency. From lobbyists in financial capitals to think tanks aligned with Western interests, the narrative is being seeded that India must loosen its stance or risk falling behind. That crypto is innovation. That regulation is resistance. But beneath this carefully engineered push lies a more strategic playbook ‒ one that India must read for what it is.
Cryptoisation of geopolitical weaponry is the latest in town. The United States ‒ already a master of proxy power ‒ is adding an anarchist idea, crypto, to its arsenal. After all, its global dominance over the last century has relied not just on economic scale or military might, but also on carefully managed flows of arms, illicit finance, and at times, even narcotics. Crypto may simply be the next iteration of that playbook. Its decentralised nature and regulatory elusiveness make it an attractive tool in grey-zone warfare.
India must draw its own line. That line begins with keeping crypto out of the hands of retail and domestic financial systems. We do not allow civilians to stockpile missile systems, however sophisticated they may be. We do not permit private entities to operate with military-grade technology, however commercially attractive it might seem. The same logic must apply here. If crypto is a potential weapon, then it belongs in the domain of state control and strategic deterrence ‒ not in the pockets of consumers, investors, or tech entrepreneurs chasing the next rally.
The Reserve Bank of India has understood this risk from the outset. Its consistent opposition to the mainstreaming of private cryptocurrencies is not conservatism. It is national interest. Monetary regulators are mandated to uphold financial sovereignty. In an age where digital flows are becoming as consequential as physical borders, monetary integrity is national security.
The pressures to shift policy are mounting. Global crypto firms are rebranding themselves as fintech infrastructure providers. Domestic lobbies argue that the tax regime is pushing the crypto economy offshore. A US administration could eventually soften its regulatory backbone. But none of this changes the core calculus. What the US may choose to ignore, India must take seriously. And India’s primary duty is not to echo global sentiment, but to secure national stability.
This is not a matter of resisting innovation. It is a matter of defining where and how that innovation must serve the country. The digital rupee, for instance, is a perfectly valid experiment in public-sector fintech. It offers a programmable, traceable, and sovereign digital instrument under full regulatory oversight. That is what responsible innovation looks like. It does not involve allowing privately minted currencies, backed by no state and subject to no accountability, to entrench themselves in the domestic economy.
Pakistan’s recent openness to crypto, with fanfare surrounding an alliance with World Liberty Financial ‒ a firm linked to the Trump family ‒ signals a larger willingness among fragile states to embrace crypto as an end-run around institutional rules. When such decisions receive the blessings of both the political and military establishment, it raises questions about intent. It also makes clear that crypto is now entering the space once occupied by shell companies, hawala networks, and narco-finance. These are design features.
India needs a crypto strategy. But that strategy must begin with clear exclusion. We must preserve the option to weaponise crypto capabilities if required ‒ to foil hostile designs, protect our financial infrastructure, or exert digital leverage in adversarial situations. But that is a sovereign function. Not a market offering.
The current state of regulatory ambiguity cannot continue. This land of grey is no longer intellectually defensible. It creates an illusion of optionality while allowing arbitrage to fester. But for the state, it is risk. What was once a delay in policy has now become a decision deferred. And that decision has consequences.
Emerging markets that have flirted with crypto liberalisation have often found themselves exposed to capital flight, speculative bubbles, and retail losses. The promise of financial inclusion quickly gives way to cycles of hype and collapse, where the only consistent winners are offshore platforms and early movers. In India, where financial literacy is uneven and real-time regulatory enforcement is still evolving, the cost of a misstep could be systemic. It is one thing to experiment in a sandbox. It is another to let the sandbox dictate the rules of the financial system.
India must instead build the architecture of strategic crypto deterrence. That means developing capabilities for surveillance, forensic tracing, and offensive cyber-finance tools ‒ not to legitimise crypto trading, but to anticipate and counter its misuse by adversaries. Just as cyber defence commands have evolved to neutralise digital threats before they manifest, a sovereign crypto arsenal must remain discreet, state-controlled, and insulated from market temptations. Crypto’s future may be decentralised, but national strategy cannot afford to be.
Crypto may be the future of finance in some form. But that future must be sovereign, deliberate, and secure. We can no longer afford to pretend that this is just another technology waiting to be regulated. It is a geopolitical instrument. And it must be treated as one.
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the publication.