Former Defense Secretary Mark Esper Urges Senate to Pass CLARITY Act, Citing National Security

Former U.S. Secretary of Defense Mark T. Esper, who served in the Trump administration from 2019 to 2020, is calling on Congress to advance the CLARITY Act, arguing that establishing a comprehensive regulatory framework for digital assets has become a national security imperative rather than a narrow question of financial policy.

In a Financial Times opinion piece, Esper warned that prolonged regulatory uncertainty surrounding cryptocurrency could drive businesses, capital, and digital asset activity out of the United States and into foreign jurisdictions with lighter oversight. His remarks come as the CLARITY Act remains stalled in the Senate despite having cleared the Senate Banking Committee earlier this year.

Esper's intervention adds a national security dimension to an increasingly contentious debate over how the United States should regulate cryptocurrencies, stablecoins, and blockchain-based financial infrastructure. It also carries particular political weight given that Esper served under President Donald Trump, whose own financial connections to the crypto industry have become a point of Democratic contention in the legislative negotiations.

A Security Framework for Crypto Regulation

For decades, cryptocurrency regulation discussions centered on investor protection, market integrity, taxation, and financial stability. Esper takes a different approach, framing digital assets as part of a broader strategic competition over financial infrastructure.

In his op-ed, Esper argued that blockchain networks and dollar-backed stablecoins are becoming integral to the global payments landscape. He cautioned that the technology will continue to advance regardless of U.S. action, and that companies and investors may simply migrate to jurisdictions with less restrictive rules. Rather than eliminating crypto-related risks, offshore migration could make those risks harder for American authorities to monitor.

The CLARITY Act's Legislative Status

The Digital Asset Market CLARITY Act of 2025 aims to establish a comprehensive regulatory framework for digital assets in the United States. The legislation seeks to clarify the respective roles of federal financial regulators—principally the Securities and Exchange Commission and the Commodity Futures Trading Commission—and set rules for different categories of digital asset activity.

The Senate Banking Committee advanced the bill in May on a 15-9 vote, a significant procedural milestone. However, committee passage does not ensure final approval. The legislation has since encountered continued Senate disagreements over financial safeguards, stablecoin provisions, enforcement authority, and ethics requirements.

Axios reported in July that negotiations grew more complex amid Democratic efforts to address President Donald Trump's financial connections to the cryptocurrency industry. The bill remains politically sensitive even as supporters insist the United States needs a comprehensive crypto framework.

The Dollar as a Strategic Asset

Esper's national security argument is rooted in the role of the U.S. dollar. The dollar serves not only as the currency for American consumers and businesses but also as a cornerstone of the international financial system. Global trade, banking, investment, and cross-border payments routinely rely on dollar-based infrastructure.

This position affords Washington considerable leverage. The U.S. government can impose sanctions on foreign governments and companies, restrict access to the American financial system, coordinate with financial institutions to identify suspicious transactions, and leverage dollar-based infrastructure as a foreign policy instrument. Esper contends that this advantage should not be taken for granted.

Blockchain and the Future of Financial Infrastructure

Blockchain technology introduces an alternative method for transferring value. Rather than depending solely on traditional banks and payment networks, blockchain-based systems allow assets to move directly between digital wallets. Stablecoins have accelerated this trend. A stablecoin is a digital asset designed to maintain a stable value, typically by being backed by or linked to a traditional currency such as the U.S. dollar.

Dollar-backed stablecoins have grown particularly significant because they merge blockchain-based transfer capabilities with exposure to the world's dominant reserve currency. Esper argues that this creates both an opportunity and a strategic challenge: widespread adoption of dollar-backed digital assets could reinforce the dollar's global standing, but if the supporting infrastructure develops outside U.S. jurisdiction, Washington could lose influence over how the system operates.

China as a Strategic Competitor

Esper specifically identifies China as a primary strategic competitor in this domain. He contends that Beijing recognizes the importance of financial infrastructure and has been actively developing alternative payment systems. China has invested heavily in digital payment technology and has explored both blockchain-based platforms and a central bank digital currency, the digital yuan, which has been in pilot testing across multiple Chinese cities.

From Esper's perspective, the concern extends beyond whether China builds another payment network. The broader issue is whether alternative financial systems could eventually diminish the reach of American financial institutions and weaken Washington's capacity to monitor international transactions. Esper has long regarded China as one of America's most significant strategic competitors and now views digital finance as another arena in that competition.

Offshore Activity and the Cost of Uncertainty

One of Esper's central arguments is that regulatory uncertainty does not halt technological development. Companies can relocate, capital can move, and developers can establish operations in other jurisdictions. Cryptocurrency makes this process especially straightforward because digital assets operate across national borders.

If American firms face ambiguous rules while foreign jurisdictions offer clearer frameworks, businesses may choose to operate elsewhere. The result, Esper warns, would be a loss of both economic activity and regulatory visibility. Regulation, in his view, does not simply determine whether crypto businesses operate—it determines where they operate.

Financial Intelligence and National Security

Financial intelligence has become a critical component of modern national security. Governments monitor financial transactions to detect terrorist financing, sanctions evasion, organized crime, and other illicit activity. Traditional financial institutions are subject to extensive anti-money laundering requirements, and the challenge lies in extending those safeguards into newer digital financial systems.

Esper argues that the CLARITY Act could bring more digital asset activity into a regulated U.S. framework. He points specifically to provisions involving anti-money laundering requirements and financial intelligence tools, arguing that keeping activity within the United States would make it easier for authorities to detect and monitor suspicious behavior.

Expanded Compliance Requirements

Esper's op-ed highlights provisions that would subject digital asset intermediaries—exchanges, brokers, and dealers—to requirements under the Bank Secrecy Act, which provides the framework for detecting and reporting suspicious financial activity. Know-your-customer requirements, a longstanding component of the traditional financial system, are also addressed.

Crypto companies have increasingly adopted similar procedures, though compliance levels vary depending on business model and jurisdiction. Supporters of the CLARITY Act argue that establishing clear federal requirements could create greater industry consistency and reduce regulatory gaps between traditional finance and digital assets.

Section 311 of the USA PATRIOT Act

Esper also emphasizes Section 311 of the USA PATRIOT Act, which grants the Treasury Department authority to impose special measures against jurisdictions or financial institutions deemed to be of primary money laundering concern. Extending such tools to digital assets, Esper argues, would give U.S. authorities greater ability to counter actors attempting to use cryptocurrency for sanctions evasion or illicit fund transfers.

This provision is particularly relevant given that digital assets can move across borders rapidly. A bad actor operating outside the United States could exploit differences between national regulatory systems. A more coordinated framework would make such strategies more difficult to execute.

Critics Push Back

Esper's position is not universally shared. Critics of the CLARITY Act argue that the legislation could leave significant gaps in financial oversight. The Senate Banking Committee's Democratic minority released a national security analysis in May warning that the bill, as then drafted, could create vulnerabilities involving criminals, terrorists, and foreign adversaries.

Transparency International has also cautioned that aspects of the legislation could leave openings for illicit finance and sanctions evasion. These criticisms underscore that the national security debate extends beyond whether the CLARITY Act passes—there is genuine disagreement over whether the current version provides adequate safeguards.

The Case for Regulatory Clarity

Supporters of the bill counter that uncertainty itself constitutes a national security risk. Without clear guidance on which regulator has authority over specific activities, companies may delay investment or relocate operations. A well-defined legal framework would help businesses plan long-term investments and help regulators determine applicable rules.

This issue is especially pressing as traditional financial institutions deepen their involvement in cryptocurrency. Banks, asset managers, and payment companies increasingly view digital assets as part of the future financial system.

Crypto's Growing Footprint

The cryptocurrency industry has evolved well beyond an experimental niche. Bitcoin has become a major global asset. Stablecoins play an important role in digital payments and crypto markets. Large financial institutions have launched or expanded digital asset products, and blockchain technology is being applied across areas from payments to tokenization.

This expansion has amplified the consequences of regulatory ambiguity. Digital assets already exist—the question is how governments will integrate them into the existing financial system.

First-Mover Advantages and the Internet Parallel

Esper argues that the United States has historically benefited from allowing private companies to innovate. He draws a comparison to America's development of the internet: the United States did not need to control every component of the internet to become the dominant force in the technology economy. American companies built major platforms and services atop an open technological foundation.

Esper believes a similar model could apply to blockchain. Clear rules could incentivize American companies to build the next generation of financial infrastructure domestically.

Legislation Versus Regulatory Guidance

Another element of Esper's argument centers on the distinction between legislation and administrative regulation. Executive policies can shift with a new administration, regulators can reprioritize, and enforcement strategies can change. Federal law, by contrast, establishes more durable rules. Esper contends that legislation would give businesses greater confidence that the regulatory framework will persist, potentially encouraging long-term investment.

The Strategic Role of Stablecoins

Stablecoins sit at the center of much of the debate because they bridge cryptocurrency infrastructure with traditional currencies. A dollar-backed stablecoin could allow someone in another country to access a digital representation of the U.S. dollar without maintaining a conventional U.S. bank account. This could extend the dollar's international reach while also creating new competition between traditional financial institutions and blockchain-based payment systems.

For U.S. policymakers, the strategic question is whether such systems reinforce or undermine American financial influence.

Global Regulatory Competition

The CLARITY Act debate is connected to a wider global competition. The United States is not the only country developing digital asset regulations. Europe has established comprehensive cryptocurrency rules under MiCA, and other jurisdictions are crafting their own frameworks. Businesses can compare regulatory environments before deciding where to base operations.

If the United States creates a framework seen as predictable and competitive, it could attract companies and investment. If lawmakers fail to reach consensus, other jurisdictions may capture a larger share of that activity.

Economic Strength as National Security

Esper's argument ultimately links economic strength to national security. A robust technology sector generates jobs, investment, and tax revenue while producing companies that can achieve global influence. The United States has historically leveraged economic power as part of its geopolitical strategy. Maintaining leadership in emerging financial technology could carry consequences well beyond the cryptocurrency industry.

This is why Esper believes the CLARITY Act warrants consideration through a national security lens.

The Road Ahead in the Senate

The Senate faces substantial work before the CLARITY Act can become law. Lawmakers must resolve disagreements over the bill's regulatory structure and other contested provisions. They also confront political pressure from the financial industry, cryptocurrency companies, consumer advocates, and national security organizations demanding stronger safeguards.

The outcome will likely hinge on whether lawmakers can forge a compromise broad enough to secure the votes needed for final passage.

Esper's Message to Congress

Esper's message is direct: he wants the Senate to act promptly and pass the CLARITY Act. Waiting, he argues, will not prevent blockchain technology from advancing. Delay could simply allow other nations to set the standards governing the emerging digital financial system. From his perspective, the United States should establish those standards itself.

The argument reflects a broader philosophy of American technological leadership: compete by building, regulate with clear rules, and ensure that critical infrastructure remains within reach of U.S. institutions.

Potential Outcomes

If the CLARITY Act becomes law, the immediate effect would likely be greater regulatory certainty for the digital asset industry. Companies could receive clearer guidance on which federal agency oversees specific activities. Exchanges, brokers, and other intermediaries would face more defined compliance responsibilities. The legislation could also serve as a foundation for future rules covering emerging digital financial products.

If the bill fails, the cryptocurrency industry would continue to develop, but the United States could remain reliant on a patchwork of existing laws, regulatory interpretations, and enforcement actions. That could prolong uncertainty for businesses and investors, potentially pushing some companies to establish operations abroad.

The Larger Question

The CLARITY Act has become a test of how Washington views cryptocurrency. Is digital finance primarily a financial risk requiring strict oversight? A technological opportunity demanding regulatory clarity? Or a strategic asset that could shape America's position in the global financial system?

Esper's argument falls squarely in the third category. He believes the United States cannot afford to treat digital assets as merely another financial product. The technology could reshape how money moves worldwide, making the rules governing it strategically consequential.

Critics counter that the legislation, as currently structured, could itself create regulatory gaps and potentially weaken protections against illicit finance. The Senate debate, therefore, is not simply about whether cryptocurrency should be regulated—it is about what kind of regulation should govern the industry and whether the final framework will strengthen or weaken America's ability to monitor digital financial activity.

The stakes extend beyond cryptocurrency markets. Stablecoins, blockchain payment networks, and digital assets could influence the future of global finance. For Esper, that future is inseparable from America's economic and strategic power.

Whether Congress can translate that debate into legislation remains uncertain. What is increasingly clear is that the battle over U.S. crypto regulation is no longer just about cryptocurrency—it is becoming a debate over financial infrastructure, technological leadership, and America's role in the global economy.