A month ago, no one could have predicted this. Yet today, we are seriously discussing the U.S. Treasury moving all of its transactions onto a blockchain. As we know, this technology underpins cryptocurrencies like Bitcoin, and the proposal is largely thanks to the increasing involvement of crypto advocate Elon Musk in the U.S. government’s affairs.
A self-proclaimed government cost-cutter, the world’s richest man and newly unelected politician has been focusing his energies on the recently launched Department of Government Efficiency, or DOGE for short. This is named after the eponymous memecoin for which Musk has become a cheerleader. In a nutshell, the new department’s job is to “rip the waste out of [America’s] $6.5 trillion budget,” at least according to Trump’s Commerce department nominee Howard Lutnick. And Musk believes a large proportion of this waste is coming from the misuse of Treasury funds.
“Career Treasury officials are breaking the law every hour of every day by approving payments that are fraudulent or do not match the funding laws passed by Congress,” the Tesla CEO wrote on X, which he owns, earlier this month. “This needs to stop now!”
When an X user asked whether the Treasury “should be put on the blockchain so this doesn’t happen,” Musk replied, “Yes!”
His view is that the transparency and immutability of the blockchain technology—which ensures all transactions are visible for everyone to see for the rest of time—would eradicate this alleged fraud. And, in theory at least, he’s absolutely right. The problem is in the implementation.
A national security risk
If anyone should support the idea of a U.S. Treasury on the blockchain, it’s me. I’m a huge proponent of this technology. Indeed, I left a very well-paid job at Goldman Sachs in 2015 to enter the blockchain space and haven’t looked back. I truly believe this technology, along with the endless financial opportunities afforded by the cryptocurrency space, can help enhance not only personal wealth, but also the efficiency and transparency of nation states. However, I don’t believe for one second that moving the U.S. Treasury onto the blockchain right now would be anything short of a disaster.
My first concern is simply security. Blockchain is essentially an immutable ledger of transactions that anyone can see at any time. This means there’s no way to hide any blockchain-based transaction. This makes it very difficult to obfuscate fraudulent activity, but it would also mean that the most sensitive financial information, such as defense spending or foreign exchange operations, of the world’s most powerful nation would be available, at least in some form, for the whole world to see—and talented hackers could connect many dots. This presents an obvious national security risk.
At a time when new technologies like AI and escalating attacks from North Korean and other hackers are putting increasing pressure on cybersecurity systems, the last thing the U.S. needs is for all of its financial data to be available for the world to see. Now, data on the blockchain could be encrypted and only visible to those with clearance, but this kind of technology is in its early days, meaning it isn’t yet scalable or ready for large-scale adoption. Indeed, if Musk wants to put his focus and financial firepower anywhere, it should be here: blockchain innovation that supports both transparency and security.
Too early to the game
Yet, even if these security concerns could be ironed out with the use of encrypted data and privacy-preserving blockchains, for example, another problem is that the U.S. Treasury is a huge enterprise. In 2023, it distributed some $5.4 trillion in federal payments and collected a similar amount in federal revenue.
In contrast, the entire market cap of the crypto industry currently stands at roughly $3.4 trillion, while Ethereum—one of the most battle-tested blockchains—handles about $322 billion. Meanwhile, Solana—the main challenger to Ethereum that has been buoyed by the launch of Trump memecoins $TRUMP and $MELANIA—has a market cap of less than $100 billion. And, indeed, the surge in trading volume after $TRUMP’s launch tested Solana to its limits. Does anyone truly believe that any one blockchain today could handle more than $5 trillion of Treasury assets? Some day, I fervently believe it will—but we’re not there yet.
The sheer size of the Treasury and the nature of its systems mean it would take years to actually transition it on-chain. Treasury officials would also require upskilling to ensure they can use the blockchain in a safe and competent way, which would entail many new hires. And this would really be essential considering the cybersecurity upgrades required to avoid a major security incident.
In short, even if the idea of the U.S. Treasury moving onto the blockchain passes muster, it will be a multi-year project. As a strong proponent of the transparency and immutability provided by blockchain technology, I truly hope to see a future where many government treasuries can move on-chain. But this isn’t something that can be rushed. Indeed, rushing it could have dire consequences. In the meantime, Musk will need to find another way to “rip the waste” out of the U.S. Treasury’s spending.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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