Crypto Investors Create Security Clearance Dilemma for Pentagon

Even though Bitcoin and some other cryptocurrencies have fallen seriously out of favor with the criminal underworld, certain government agencies continue to lump them together with coins known for their shadier associations.

In an attempt to deal with employees investing in coins that might allow them a degree of anonymity, the Pentagon is faced with making a decision on how it should treat people who own cryptocurrencies.

“There are a lot of good things about cryptocurrencies, but at the same time there are these security risks. Think about a knife: It could be used for good things and it could be used for bad things as well,” Param Vir Singh, head of Carnegie Mellon University’s PNC Center for Financial Services Innovation, told Bloomberg.

The US Department of Defense (DoD) currently has just under half a million employees. It’s highly likely that some of them have dabbled in Bitcoin, Ether, Monero, or the like.

Chief among this agency’s concerns is the prospect of some employees engaging in illegal activities under the cloak of anonymity offered by these digital currencies. One example would be the sale of state secrets to an organization in exchange for Monero. Done correctly, this would effectively mask the perpetrators’ identities and make it extraordinarily difficult to investigate the matter.

The problem is aggravated by the sheer scale involved. About four million people in the US currently have some level of security clearance, making them privy to information that should not be in the possession of state enemies.

Another issue that crops up is the complex screening process for government employees. Any added step in such investigations could throw a wrench in the Pentagon’s hiring efforts.

“If we’re going to say that if you’ve got a Bitcoin or another digital currency account that could be a signal or shoot up a red flag for a security clearance, guess what? Those people aren’t going to sit around waiting to try to onboard for a government job. It would grow the backlog considerably, in my view,” said Greg Touhill, the country’s former federal chief information security officer and the first person to fill the role created by the Obama administration.

If the DoD wants to implement a speedy screening process while still checking for cryptocurrency holdings, it could start by refining its search for cryptocurrencies that are actually associated with potential criminal activity.

Bitcoin isn’t the “big bad wolf” it is often perceived to be. Even Europol’s executive director confirmed that criminals are abandoning it for coins that stretch the limits of what authorities can track.

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While it is in every nation’s best interests to ensure that individuals with security clearance are thoroughly vetted, there is little in the way of evidence that someone who owns Bitcoin is more prone to risky behavior and could put operations in jeopardy.