The row is over the government's so-called Clipper Chip, an encryption device aimed at keeping data on America's information networks secure. It wants to see the chip built into every telephone, computer and fax machine. The catch is that the authorities retain the keys to decode the data.
But in the anarchic world of computer networks, one of the most sacred rules is that there should be no rules - at least not of the sort that governments make.
US officials make the Clipper Chip sound a tempting proposition. It offers industrial- strength security where most users now have none at all. The chip would be certified by the US government and be widely available. Other encryption technologies are restricted and their export banned.
But because increasing use of computer communications and the availability of sophisticated encryption software will make it nearly impossible to listen in on suspected terrorists or criminals, US security agencies plan to keep the keys so that in cases where they have obtained court approval to conduct a wiretap, they will be able to decode suspect transmissions.
The chip has been received with almost universal derision. Led by an unlikely coalition of computer companies, civil libertarians and a band of crypto- underground activists known as cypherpunks, Clipper Chip opponents have mounted unrelenting attacks.
Earlier this month, anti- Clipper activists sent dozens of American newspapers an electronic copy of an internal National Security Agency handbook, to embarrass the agency by demonstrating that if documents could leak out, then so could encryption keys.
Others printed stickers apeing the 'Intel Inside' computer chip advertisements.
Manufacturers argue that the Clipper Chip, which is made by the Californian company Mykotronix, is too bulky and generates too much heat to be used in most computer modems and cellular phones.
But the principal flaw, opponents say, is the assumption that terrorists or international drug cartels would be foolish enough to use an encryption technology that they know can be deciphered by law enforcement agencies.
The government has promised to make adoption of the Clipper Chip voluntary and not to outlaw competing encryption technologies. But the activists suspect it will break this undertaking, thereby forcing users to adopt its security or do with none at all.
Current restrictions on encryption technology cause problems for computer and electronics companies, which are reluctant to incorporate into their products software they cannot export. If the US tightens the rules on competing encryption methods further, market forces may make the Clipper Chip the only option.
At the moment there is a stand-off. The Clinton administration, which champions the chip, is continuing to push the technology. It has made it the standard for sending Defence Department messages, and is encouraging companies that correspond with the government to use the technology.
Only one company, AT&T, is actually selling a product with a Clipper Chip: a security adaptor for telephones, aimed at the military and defence markets.
Most large US computer makers have come out against the proposal. They say no international customers would want to buy equipment that US spies can tap into, particularly when powerful encryption technology remains largely unrestricted in Europe, as it does elsewhere.
The administration is reported to be lobbying other governments to adopt the Clipper Chip standard for international security purposes, especially fighting terrorism.
With neither side showing any sign of backing down, the war over electronic secrecy may have only just begun.