1 Former Secretary of Defense Says That the Clarity Act Is a National Security Issue. Here's Why That Could Be Bullish for Crypto.

As you've probably heard, the crypto sector is poised to see a lot of changes, and soon. The U.S. Senate is scheduled to vote Sept. 15 on the Clarity Act, which would set a wide array of rules for crypto. It's no surprise that crypto companies like Coinbase Global (NASDAQ: COIN) are lobbying heavily to get their preferred version of the bill passed, and as part of those efforts, they've recruited some friends in high places.

In early August, former Secretary of Defense Mark Esper argued in the Financial Times that passing the Clarity Act is a national security issue for the U.S. He led the Pentagon from 2019 to 2020, and now he's an advisor to Coinbase.

If his argument about the bill takes hold, it could be bullish for crypto. Here's why.

Image source: Getty Images.

This isn't nearly as outlandish an argument as it may seem at first

Esper described the Clarity Act as a national security bill because it can be interpreted as something that could either bolster or detract from the relative position of the U.S. in the global financial order.

Essentially, he said that if the crypto industry were left to its own devices, without the guidance and guardrails provided by legislation, crypto capital might flow to jurisdictions where the rules are clearer for financial institutions. While those capital flows would more likely land in neutral or allied nations like the U.A.E. or Singapore than in adversaries as of today, that could change in the future; Esper identified China as being the biggest long-term competitor to potentially benefit.

More broadly, Esper is pointing out that U.S. power in the financial domain relies on control over the payment systems that carry dollars and other U.S. assets, such as Treasuries. The emerging challenge is that it's trivial for blockchains to circumvent existing control mechanisms, rendering them irrelevant.

This isn't the first time crypto has been positioned as a national security concern, either. During the April 30 House Armed Services Committee hearing, Secretary of War Pete Hegseth said that there were classified programs about Bitcoin that were already active. But the argument for crypto as a security issue is far broader than Bitcoin alone.

State-affiliated hackers from North Korea were responsible for as much as 76% of all hack-related crypto theft during the first four months of 2026, stealing $285 million from one protocol hosted on Solana (CRYPTO: SOL) and another $292 million from a project hosted on Ethereum (CRYPTO: ETH). U.S. businesses and individuals had their funds stolen in both cases, and these were not the first such incidents.

How investors might benefit

The Clarity Act would require exchanges, brokers, and other financial institutions that engage with the crypto sector to comply with anti-money laundering (AML) and know-your-customer (KYC) regulations, which would help control the off-ramps stolen funds might use to escape after a breach. It would also expand some of the Treasury Department's powers to include digital assets, which Esper specifically links to helping to mitigate the risk of hacks originating from North Korea and from organized criminal groups.

If there are fewer ways for attackers to escape the crypto sector with the money they stole, there will likely be fewer hacks resulting in a permanent loss of funds.

As a result, chains with decentralized finance (DeFi) ecosystems, like Solana and Ethereum, are likely to benefit the most if the Clarity Act passes, with larger volumes of institutional capital being more comfortable in allocating to their ecosystem projects. Bitcoin could also benefit; although its immutable and traceable ledger of transactions has long made it a poor choice for conducting criminal activity, further limiting its usefulness in illicit affairs would make it even less risky for financial institutions to hold.

As positive as it would be for the future of the crypto sector, investors should probably lower their expectations of the Clarity Act passing this year. Even with a vote scheduled and a former Secretary of Defense saying it's important for national security, ongoing disagreements over key issues like ethics reforms could push the actual vote into 2027. If that happens, it might be dropped altogether.

Alex Carchidi has positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.