The technology behind Bitcoin is a “boon for surveillance” and shouldn’t be shunned by governments but embraced, according to an ex-CIA boss. 

Michael Morell, who was previously the CIA’s acting director, said in ‘An Analysis of Bitcoin’s Use in Illicit Finance’ that “blockchain technology is a powerful but underutilized forensic tool for governments to identify illicit activity and bring criminals to justice.”

The report, co-authored by Josh Kirshner and Thomas Schoenberger, was ostensibly written as a defense of Bitcoin—a response to growing “concerns about the illicit finance implications of the cryptocurrency ecosystem.”

Published by the recently formed Crypto Council for Innovation, led by Coinbase and Square, among others, the report concluded that criminal use of Bitcoin is “significantly overstated”—rather than being the currency of choice for criminals, it can be used to catch them. 

“Put simply, blockchain analysis is a highly effective crime fighting and intelligence gathering tool,” the report read. 

The reason? The technology Bitcoin runs on—blockchain—means all transactions are logged on a public, decentralized, immutable ledger. 

Tracking illicit Bitcoin transactions is therefore easier than tracing illegal funds moved across borders using “traditional banking transactions” and “far easier” than trying to follow cash, according to the report. 

One source in the report was quoted saying that “if all criminals used blockchain, we could wipe out illicit financial activity.” And this goes against the narrative that authorities in the United States and Europe right now, as well as recent reports from crypto tracing firms such as Chainalysis. In December 2020, Chainalysis (which works closely with law enforcement throughout the world) said darknet markets had raked in more than ever in crypto.

Most recently, in February, US Treasury Secretary Janet Yellen expressed worry that Bitcoin was used “often for illicit finance.” And The European Central Bank’s president, Christine Lagarde, in January said that Bitcoin was used for “funny business” and money laundering. 

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But the former CIA director’s investigation found Bitcoin being used primarily for illicit finance was “uninformed and not based on data.”

Privacy coins like Monero, on the other hand, are favored by criminals—and “illicit activity as a percent of total transaction volume is ‘far larger’ than it is for Bitcoin” with such digital assets, the findings showed. 

The report also noted that former Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes, Daniel Glaser, this year said that the regulation of crypto in the “appropriate way” was needed for “law enforcement agencies to be able to trace transactions.”

Though it did mention the difficulties posed with decentralized exchanges. “Although DEXs are responsible for only a small portion of overall cryptocurrency transaction volume, their decentralized, mostly open-source nature adds an additional layer of anonymity and thus offers increased opportunities for moving illicit funds,” the report said. 

Morell’s report concluded that Bitcoin is singled out because “people are typically fearful of what they do not understand.” 

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