"So if it controls the digital universe there and also has the ability to basically hack that system, it controls everything."
The IPO comes as bitcoin reached over $63,000 on Wednesday, advancing 115% so far this year.
Founded in 2012, Coinbase is a platform used to trade over 50 cryptocurrencies including bitcoin. The company has 56 million users and serves 7,000 institutional customers and 115,000 ecosystem partners in over 100 countries.
Navarro said "the whole bitcoin empire digital coinage, dollars that’s all predicated on this thing called blockchain technology, the idea that you can perfectly encrypt a system" is "frightening."
"The problem is that one of the things that China is doing right now is to try to dominate blockchain," he continued, before adding that "you can guarantee" that China likely already knows how to decrypt bitcoin.
Tech investor and PayPal co-founder Peter Thiel also warned of China and cryptocurrency.
Last week, Thiel argued last week that China could use the cryptocurrency bitcoin as a "financial weapon" against the U.S.
Thiel is also the co-founder of Palantir, a data software company that has hundreds of millions of dollars worth of contracts with the U.S. and foreign governments that use its technology for law-enforcement purposes. Palantir said in an August 2020 SEC filing that it does not "work with the Chinese communist party and have chosen not to host our platforms in China, which may limit our growth prospects."
"From China’s point of view … they don’t like the U.S. having this reserve currency, because it gives us a lot of leverage over Iranian oil supply chains and all sorts of things like that," Thiel said at the Nixon Seminar on Conservative Realism and National Security, a monthly gathering of foreign affairs experts who analyze U.S. foreign policy when asked about China's prospective plan to create a digital currency.
He continued: "… And, even though I’m sort of a pro-crypto, pro-bitcoin maximalist person, I do wonder whether at this point bitcoin should also be thought in part of as a Chinese financial weapon against the U.S."
Cryptocurrencies are decentralized, meaning they are not controlled by any specific government or central banking system, unlike cash or debit and credit cards. They are instead controlled by users and computer algorithms.
On the contrary, China’s version of a digital currency is controlled by its central bank, which will issue the new electronic money, according to the Wall Street Journal, which added that the digital yuan "is expected to give China’s government vast new tools to monitor both its economy and its people."
Navarro warned that in the 21st century, "if you control digital currency space you control the world and that’s where communist China is going right now."
The former White House trade adviser also discussed the current market environment and how it is impacted by China’s digital currency.
He said he is "not seeing quite the same kind of bullish scenario [as] everybody else is despite the fact that Washington is throwing a tremendous amount of stimulus at the global economy right now" due to "what’s going on with inflation," the coronavirus "pandemic risk" and "also with this digital currency gambit that China is throwing at us."
FOX Business’ Lucas Manfredi and Audrey Conklin contributed to this report.