Military Force, Sanctions, and Crypto Are Undercutting Each Other

On July 11, Treasury Secretary Scott Bessent vowed the administration would keep tightening the vise on Iranian elites.

The Treasury will continue using every tool at its disposal to isolate him and other regime elites from the global financial system. — Scott Bessent

On July 15, he announced new sanctions.

Treasury will continue to target and disrupt the illicit procurement networks that fund Iran's weapons programs and war machine. — Scott Bessent

On July 20, he struck a different note before Congress.

Dollar dominance is essential — Scott Bessent

He warned that excessive sanctions could push global economies toward alternatives, threatening the dollar's reserve status ^[1]. One official, one week, three positions that only make sense when you see the loop they sit inside. The administration is simultaneously deploying three instruments of American financial power — military force against Iran, dollar sanctions on Iran and Russia, and crypto promotion — and each one undercuts the next. The pattern is visible only when you line up the administration's actions across energy, financial, and crypto policy from March through July. The first undercutting runs from the battlefield to the sanctions desk. Operation Epic Fury, launched February 28, began with a decapitation strike and escalated to more than 15,000 targets ^[2]. Iran responded by blockading the Strait of Hormuz, which handles roughly 20% of global oil, pushing Brent crude near $120 per barrel. The administration's answer was to ease the very sanctions it was simultaneously tightening. In March, the White House framed a package of emergency measures — a Jones Act waiver, a release of 172 million barrels from the Strategic Petroleum Reserve, and sanctions relief on Venezuelan and Russian oil — in explicit terms.

President Trump’s decision to issue a 60-day Jones Act waiver is just another step to mitigate the short-term disruptions to the oil market as the U.S. military continues meeting the objectives of Operation Epic Fury. — Karoline Leavitt

The administration itself was linking sanctions relief directly to the military campaign's market fallout ^[3]. Trump made the transactional logic plain.

So we have sanctions on some countries. We’re going to take those sanctions off until this straightens out. — Donald Trump

Sanctions were no longer a fixed penalty; they were a dial the president could turn to manage the economic side effects of his own war ^[4]. The whipsaw was sharpest in mid-April. On April 15, Bessent ruled out renewing Russian oil licenses. Two days later, the Treasury reversed course and issued a 30-day extension ^[5]. The administration was struggling to control the economic spillover of its own military campaign, and the sanctions instrument was bending under the pressure. The contradiction was diplomatic as well as economic: Ukraine's Zelenskyy condemned the waivers as funneling roughly $10 billion to Russia's war effort, while EU Commission President von der Leyen stated flatly that it was not the time to relax sanctions against Russia ^[6]. The Western sanctions coalition was splitting along a fault line the administration's own war had opened. The second undercutting runs from the sanctions desk outward. Even as the Treasury was warning Congress in July that excessive sanctions could threaten dollar dominance, it was expanding the sanctions weapon ^[1]. The administration oscillated between easing and tightening — letting waivers expire on April 11 for Russia and April 19 for Iran, then reinstating oil sanctions on both countries mid-month ^[7]. The Treasury also began exploring the repurposing of frozen Iranian assets and seized ships to compensate Gulf allies for up to $58 billion in infrastructure damage, extending sanctions from a tool of economic pressure into a mechanism of post-conflict reconstruction funding ^[8]. The strategic response from adversaries and allies alike has been to build alternatives to dollar-denominated systems. China is explicitly advocating for replacing the dollar as the global reserve, framing the US ability to impose sanctions through dollar access as the core problem ^[9]. Saudi Arabia declined to renew its commitment to price oil exclusively in dollars and entered a $7 billion currency swap with China ^[10]. Some vessels transiting the Strait of Hormuz are reportedly paying transit fees in Chinese yuan — the very corridor the US military is fighting to keep open is generating transactions in the rival currency the sanctions weapon is meant to contain. A June 2026 survey by the Official Monetary and Financial Institutions Forum found that for the first time since 2023, more central banks plan to reduce dollar holdings than increase them over the next decade, with 51% citing protection against geopolitical risk as a primary driver ^[11].

Protection against geopolitical risk is cited by 51% of respondents, up 11% from 2024 — Official Monetary and Financial Institutions Forum

The sanctions weapon is generating the de-dollarization momentum the Treasury itself warns about. The third undercutting runs on blockchain rails. Iran's largest crypto exchange, Nobitex, processed $2.3 billion using the Tron and BNB Chain blockchains for sanctioned Iranian entities ^[12]. Those same blockchain networks are backed by founders Justin Sun and Changpeng Zhao, who are financial backers of Trump's own World Liberty Financial crypto venture. The president's business interests are underpinned by the same infrastructure his Treasury is fighting as a sanctions-evasion channel. The administration is aware of the tension. Treasury seized $1 billion in Iranian crypto under Operation Economic Fury. Bessent was blunt about the method.

Just outright grabbed the wallets. — Scott Bessent

Meanwhile, Trump launched the Trump Accounts program and a Strategic Bitcoin Reserve, declaring the US must be the "crypto capital of the planet" to prevent China from dominating ^[13]. The administration is treating crypto as both the sanctions-evasion threat and the strategic asset of the future, and the two roles run on the same rails. The counter-evidence is real and should be stated plainly. The dollar strengthened as a safe haven during the acute phase of the Iran conflict, with the dollar index rising 1.5% in a single week ^[14]. The IMF's chief economist, Pierre-Olivier Gourinchas, stated in late June that the data tells a different story.

We are very firmly in the dollar-centered world. — Pierre-Olivier Gourinchas

He saw very little movement away from a dollar-centered world ^[15]. ECB board member Isabel Schnabel has argued that dollar-pegged stablecoins could actually reinforce dollar dominance through network effects.

Even for regions with strong monetary credibility, the persistent dominance of U.S. dollar stablecoins could, over time, have undesirable consequences if it strengthens U.S. dollar invoicing and global liquidity holdings — Isabel Schnabel

The crypto push the administration fears as a sanctions-evasion channel may simultaneously extend the dollar's global role ^[16]. None of this breaks the pattern. The pattern is a strategic engine: the administration's own actions reveal awareness of a problem its own policy choices are accelerating. The same official who calls dollar dominance essential is expanding the instrument he says is eroding it — and that is awareness, not ignorance. The three instruments continue to undercut each other, and the administration has named the danger while feeding it.