Pentagon Runs Bitcoin Node as U.S.-China Rivalry Grows

Admiral Samuel Paparo, commander of U.S. Indo-Pacific Command, told a Senate panel that “Bitcoin is a reality” and called it “a valuable computer science tool as a power projection.” He testified the next day at a House hearing that the Defense Department operates its own Bitcoin node and is conducting operational tests using the Bitcoin protocol to secure and protect networks.

Several governments are changing how they use Bitcoin. Iran has accepted Bitcoin to pay for ships passing through the Strait of Hormuz. Taiwan is considering holding Bitcoin as a reserve asset in case its financial system is targeted. Russia said it will accept Bitcoin for international trade starting in July.

China banned crypto trading and mining in 2021, citing environmental harm, fraud and illicit finance. Beijing plans to prohibit online promotion of crypto starting September 30. At the same time, Chinese institutions are reported to hold one of the largest government Bitcoin stockpiles.

In May 2025 China’s International Monetary Institute circulated a report by former White House economist Matthew Ferranti arguing Bitcoin could help central banks guard against inflation, sanctions and financial instability and recommended monitoring Bitcoin’s role as a reserve asset.

U.S. prosecutors say they seized about 127,000 Bitcoin, worth roughly $15 billion, from Chen Zhi, a Chinese national accused of running fraud operations in Southeast Asia. Chen returned to China in January and Chinese authorities filed their own charges. Chinese officials allege U.S. agents obtained the coins by hacking Chen’s mining operation, LuBian, in 2020. The United States holds roughly 198,000 Bitcoin; if Chen’s holdings were recovered by China, reports say Chinese control could rise to about 321,000 Bitcoin.

Concern in Washington centers on mining hardware. Specialized chips and Bitcoin mining rigs are largely produced by Chinese firms, with Bitmain accounting for about 82% of global production of certain machines. In March, Senators Bill Cassidy and Cynthia Lummis introduced the Mined in America Act, a bill to create a voluntary Department of Commerce certification for miners.

Under the proposal, certified miners could not buy new China-made hardware after January 1, 2027, and would be required to stop using existing China-made equipment by 2030. The bill would also codify a March 2025 executive order that established a Strategic Bitcoin Reserve and allow certified miners to sell newly mined Bitcoin to the Treasury on preferential tax terms.

Senator Cassidy said, “Digital asset mining is a big part of our economy. We should be doing it here in America.” Dennis Porter of the Satoshi Action Fund called the concentration of hardware suppliers “a liability.” Representative William Timmons framed the contest over money and information by asking, “If you can’t control your citizenry as it relates to information and money, what do you have left?”

Pentagon officials have said running a node and testing the Bitcoin protocol can help secure communications and validate cryptographic techniques that might strengthen defense networks. Paparo linked those technical tests to strategic concerns in the Indo-Pacific, where governments are experimenting with digital assets in trade and finance.

The issue spans defense, finance and trade policy as lawmakers consider security risks, the economic footprint of mining and the concentration of hardware production overseas. Some countries that restrict crypto domestically continue to explore Bitcoin for state uses, including reserves and international payments.