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On March 7, 2023, Senator Mark Warner proposed the RESTRICT Act (S. 686) to address technology-based threats to the security and safety of Americans. The Act proposes that the Secretary of Commerce be given the power to review business transactions involving certain information and communications technologies products or services when they are connected to a “foreign adversary” of the United States and pose an “undue and unacceptable risk” to the national security of the United States or its citizens.
The RESTRICT Act grants the Secretary of Commerce the authority to review transactions by certain foreign entities who offer “information and communications technologies products or services” (ICTS) to identify, investigate, and mitigate “undue and unacceptable” risks to the national security of the United States or its citizens. The Act applies to ICTS entities that are held in whole or in part by, or otherwise fall under the jurisdiction of a country or government that is designated under the Act as a “foreign adversary” of the United States, and has more than one million active users or units sold in the United States.
The RESTRICT Act targets corporate entities “engaged in ‘sabotage or subversion’ of communications technology in the U.S.” by causing harm to “critical infrastructure” or tampering with federal elections. The Act’s initial text classifies China (including Hong Kong and Macau), Cuba, Iran, Russia, and the Nicolás Maduro regime of Venezuela as foreign adversaries.
The RESTRICT Act would make it unlawful for any person to violate any order or mitigation measure issued under the Act, with civil penalties of up to $250,000 or “twice the value of the transaction that is the basis of the violation with respect to which the penalty is imposed,” whichever is greater, and criminal penalties of up to $1 million and up to 20 years imprisonment.
The RESTRICT Act has been characterized as a means to potentially restrict or prohibit the Chinese-owned video sharing service TikTok from conducting business in the United States. Some media outlets have described the bill as being broad enough to cover end-users, such as criminalizing the use of a VPN service to access services blocked from doing business in the United States under the Act. Senator Warner’s office stated that the bill was intended to target corporate entities engaged in “sabotage or subversion” of communications technology in the U.S. and not target end-users necessarily, despite such wording not having been used in the bill itself.
The proposed legislation seeks to mitigate the potential risks associated with foreign adversaries that may use technology to interfere and manipulate federal elections, undermine the democratic process, and impact the country’s critical infrastructure and digital economy. The United States government has increasingly become concerned with foreign adversaries’ potential to exploit vulnerabilities in critical infrastructure, such as the cyberattacks on the Colonial Pipeline in May 2021 and the SolarWinds supply chain attack in late 2020.
While the RESTRICT Act is a proposed legislation and its impact remains to be seen, it highlights the ongoing concerns and challenges associated with cybersecurity threats in today’s interconnected world. As more and more aspects of our lives become digitized, the potential for foreign adversaries to exploit technology to harm American citizens and interests increases. The proposed legislation seeks to address this challenge by granting the Secretary of Commerce the authority to review and mitigate risks associated with certain foreign entities offering ICTS products or services.
In conclusion, the RESTRICT Act proposes to address technology-based threats to the security and safety of Americans by granting the Secretary of Commerce the authority to review business transactions involving certain information and communications technologies products or services when they are connected to a “foreign adversary” of the United States and pose an “undue and unacceptable risk” to the national security of the United States or its citizens. The Act targets corporate entities engaged in “sabotage or subversion” of communications technology in the US, and aims to mitigate the potential risks associated with foreign adversaries that may use technology to interfere and manipulate federal elections, undermine the democratic process, and impact the country’s critical infrastructure and digital economy.
However, the RESTRICT Act has also raised concerns about its potential impact on the US crypto industry. If enacted, the Act could potentially drive US crypto firms offshore, leaving Americans with fewer options and higher fees, and hyper centralizing a space that was supposed to be decentralized. This could make the US less competitive economically and ultimately weaken the US dollar when it ceases to be the off-ramp in crypto. Additionally, the Act could potentially cause Americans to seek a competitive hedge against inflation or even hyperinflation by holding non-US currency as their off-ramp.
Overall, the RESTRICT Act highlights the ongoing challenges associated with cybersecurity threats and the need for measures to mitigate the potential risks posed by foreign adversaries. However, it is important to balance national security concerns with economic competitiveness and innovation in the rapidly evolving digital space.

Public Sentiment —

The proposed RESTRICT Act has received mixed reactions from different groups. Some have praised the bill, stating that it is a step in the right direction towards ensuring national security in the digital age. Others, however, have criticized the bill, citing concerns over its potential impact on innovation and free speech.
One argument against the RESTRICT Act is that it could be used as a tool for protectionism, where American companies are given an unfair advantage over their foreign counterparts. Critics argue that this could lead to retaliation from other countries, resulting in a global trade war that could harm the global economy.
Another concern is that the RESTRICT Act could be used to stifle free speech and expression. The bill could potentially be used to target any foreign technology company that does not align with the policies and values of the US government, even if they do not pose a threat to national security. This could result in the censorship of ideas and the stifling of innovation.
Despite these concerns, proponents of the RESTRICT Act argue that the bill is necessary to protect the country’s critical infrastructure and digital economy from foreign adversaries who seek to harm the United States. They argue that the bill provides a framework for identifying and mitigating risks to national security without infringing on the rights of individuals or companies.
The RESTRICT Act is proposed legislation that seeks to grant the Secretary of Commerce the authority to review business transactions involving certain information and communications technologies products or services connected to foreign adversaries of the United States. The bill has received mixed reactions, with proponents arguing that it is necessary to protect national security, while critics have expressed concerns over its potential impact on innovation and free speech. The bill is currently in its early stages, and it remains to be seen whether it will be passed into law.

How Could This Impact Crypto —

The RESTRICT Act could potentially have an impact on the crypto industry in the United States. The Act applies to foreign entities that offer “information and communications technologies products or services” (ICTS) that pose an “undue and unacceptable” risk to national security. This includes but is not limited to impacts on critical infrastructure and digital economy, sabotage or subversion of ICTS in the United States, interference and manipulation of federal elections, and undermining the democratic process.
Given that the crypto industry operates on a global scale and involves the use of information and communication technologies, it is possible that the RESTRICT Act could be used to regulate or restrict certain crypto transactions that involve foreign entities. For example, if a foreign crypto exchange is designated as a “foreign adversary” under the Act and poses a risk to national security, the Secretary of Commerce could review and potentially prohibit transactions involving that exchange.
Furthermore, the Act includes civil and criminal penalties for violating orders or mitigation measures issued under the Act. This could potentially be used to penalize individuals or companies that violate regulations related to crypto transactions involving foreign entities that are designated as “foreign adversaries”.
It is important to note that the RESTRICT Act is still in its early stages and has not yet been passed into law. Additionally, the Act is intended to address specific national security concerns and is not specifically targeted at the crypto industry. However, the Act’s broad language and potential impact on ICTS products and services could have implications for the crypto industry in the future.

The Blanket Authority Grants The Power to Pull License….

The RESTRICT Act grants the Secretary of Commerce the authority to review business transactions involving certain information and communications technologies products or services (ICTS) connected to a “foreign adversary” of the United States that pose an “undue and unacceptable risk” to national security. The Act provides the Secretary of Commerce with the power to identify, investigate, and mitigate risks associated with foreign entities that offer ICTS products or services that could impact the United States’ critical infrastructure and digital economy, sabotage or subvert ICTS in the United States, interfere and manipulate federal elections, or undermine the democratic process.
The Act applies to ICTS entities that are held in whole or in part by, or otherwise fall under the jurisdiction of a country or government that is designated under the Act as a “foreign adversary” of the United States, and has more than one million active users or units sold in the United States. The initial text of the Act designates China (including Hong Kong and Macau), Cuba, Iran, Russia, and the Nicolás Maduro regime of Venezuela as foreign adversaries.
If the Secretary of Commerce determines that a foreign ICTS entity poses an undue and unacceptable risk to national security, the Act gives the Secretary the power to order mitigation measures. These mitigation measures may include requiring the entity to take specific actions to mitigate the identified risk, such as divesting ownership or control of the entity, or ceasing certain activities or operations. If the entity fails to comply with the Secretary’s order, the Secretary may impose penalties and pull licenses.
The Act provides civil penalties of up to $250,000 or “twice the value of the transaction that is the basis of the violation with respect to which the penalty is imposed,” whichever is greater, for any person who violates any order or mitigation measure issued under the RESTRICT Act. Additionally, criminal penalties of up to $1 million and up to 20 years imprisonment may be imposed.
The Act’s language is broad and its potential impact on businesses, including those in the ICTS and crypto industries, could be significant. The ability to pull licenses for non-compliance with mitigation measures is a powerful tool in ensuring that foreign entities comply with the Act’s regulations. It is important to note that the Act is still in the proposal stage and has not yet become law. If it were to pass, it could have far-reaching implications for businesses operating in the ICTS and crypto industries.

The Impact on National Defense —

The RESTRICT Act has been receiving criticism due to its potential impact on the US crypto industry, as it may drive crypto firms offshore and leave Americans with fewer options and higher fees. This could hyper centralize a space that was supposed to be decentralized, ultimately making the US less competitive economically.
One of the core principles of the cryptocurrency movement is decentralization. Decentralization refers to the distribution of power away from a central authority and towards individuals or communities. This principle is what makes cryptocurrencies so attractive to people, as it allows them to transact directly with one another without the need for intermediaries like banks or governments. The RESTRICT Act, however, may undermine this principle by giving the government the ability to pull licenses and force crypto firms to operate under tighter regulations.
This could lead to a situation where US-based crypto firms are forced to move offshore, where they can operate more freely and avoid government interference. This would leave Americans with fewer options for buying and selling cryptocurrencies and would likely result in higher fees, as offshore firms may charge more to compensate for the increased regulatory burden.
Furthermore, the RESTRICT Act could have national defense implications. Cryptocurrencies have been identified as a potential threat to national security due to their ability to facilitate money laundering, terrorism financing, and other illicit activities. However, the crypto industry has also been seen as a strategic asset for the US, as it could help the country maintain its dominance in the global financial system.
By driving US crypto firms offshore, the RESTRICT Act may weaken the US’s ability to monitor and regulate the crypto industry, leaving the country vulnerable to threats from foreign actors. It may also make it more difficult for the US to compete economically, as other countries that are more crypto-friendly could gain an advantage in this emerging market.
Finally, the RESTRICT Act could weaken the US dollar as the primary off-ramp for cryptocurrencies. Cryptocurrencies have the potential to disrupt the traditional financial system by creating new channels for cross-border payments and circumventing the traditional banking system. However, the US dollar has remained the dominant currency for buying and selling cryptocurrencies due to its stability and global acceptance. If US-based crypto firms are forced to move offshore due to the RESTRICT Act, this could weaken the US dollar’s position as the primary off-ramp for cryptocurrencies, leading to a loss of influence for the US in the global financial system.
In conclusion, the RESTRICT Act may have unintended consequences that could undermine the core principles of the cryptocurrency movement, weaken the US’s ability to monitor and regulate the crypto industry, and ultimately weaken the US dollar’s position as the primary off-ramp for cryptocurrencies. As with any new legislation, it is important to consider the potential unintended consequences and to find ways to mitigate them in order to achieve the desired policy outcomes.

The Unintended Consequences —

The RESTRICT Act could potentially have unintended consequences, such as driving US crypto firms offshore and limiting options for Americans while increasing fees. This could ultimately centralize a space that was intended to be decentralized, making the US less competitive economically. From a national defense perspective, this could also weaken the US dollar as it ceases to be the off-ramp for crypto.
One potential consequence is that Americans could start seeking a competitive hedge against inflation, or even hyperinflation, by holding non-US currency as their off-ramp. This could further erode confidence in the US dollar, as well as US financial institutions. This crisis in confidence regarding numerous banking collapses of the past, which has spread to the US dollar, could become a real concern.
The perception of the US dollar has changed dramatically in the past, as evidenced by the depegging of USDC from the US dollar in December 2021. This event served as a reminder that even stablecoins, which are supposed to be pegged to the US dollar, are not infallible. This could lead to a shift in trust away from US financial institutions, potentially resulting in a flight of capital and further weakening of the US dollar.
Overall, while the RESTRICT Act may be well-intentioned in terms of protecting national security, it is important to consider the potential unintended consequences, such as driving US crypto firms offshore, reducing options for Americans, and weakening the US dollar. As the world becomes increasingly interconnected, it is important for policymakers to consider the long-term impact of legislation on the global economy and financial system.
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