Wednesday, April 14, 2021

Former CIA Director Comes Out in Favor of Bitcoin

 Well, this is a mad twisted story.

The newly formed lobbying group Crypto Council for Innovation (whose founding members include Coinbase, Fidelity Digital Assets, and Square) recently paid Michael Morell, a former acting director of the Central Intelligence Agency, to write a paper on bitcoin.

His study (An Analysis of Bitcoin's Use in Illicit Finance ), surprise, reaches conclusions that line up with the crypto group that paid him to write the paper---that crypto is a good thing.

But, his support is quite bizarre if one looks at it from the crypto sector perspective and at a deeper level.

One of the key reasons he supports cryptocurrencies is because blockchain analysis is a highly effective crime-fighting and intelligence-gathering tool.

Got that "intelligence-gathering tool"?

Forbes reports:

[I]nteresting to Morell was how analytic firms such as Chainalysis, CipherTrace, and Elliptic can employ forensic and artificial intelligence tools to find illicit actors and activity on blockchains. In fact, he said that he was “literally blown away by how they find illicit activity...this is great intelligence work.” 

He also made sure to point out that this analysis works on multiple levels because it can be used to track the actions of known actors as well as identify previously unknown people of interest.

Basically, Morell is stating the obvious that cryptocurrencies are highly trackable. 

I am not sure why the Crypto Council is proud of this study (They are aggressively promoting Morell's paper). From my perspective, it sticks a knife in the heart of cryptocurrencies.

From Morrell's paper (my highlight):

All of the experts we consulted believe that governments have been slow to recognize the forensic power of blockchain technology. This lag reflects a lack of awareness
at senior and working levels, as well as the challenges understanding and working with the extreme complexity of the computer science associated with blockchain forensics. While there is a growing cadre of government officials who have successfully used blockchain analytic tools to prosecute bad actors and seize illicit proceeds, relatively few current government employees have the skills to use this technology to its full potential.
One expert went even further, saying that the biggest threat involving cryptocurrencies is not illicit finance but rather that governments do not yet fully understand the power of blockchain as a tool for law enforcement and intelligence agencies

One further note, the study is put together in what best can be called a time-share promotion brochure style.

These pictures were all in the study:

What the hell do these pics have anything to do with a serious study?

I have really never seen a study put out in glossy format before.

Snippets of a study are occasionally put out as a part of a promotion brochure but never the entire study.

I have profitably traded in and out of bitcoin three times in the EPJ Daily Alert but it has never left my consciousness when trading that I was only surfing a mad craze.

Digital currencies whether coming out of the private sector or central banks are a very bad idea in terms of the dangers to privacy. It provides a key-turn system for use by authoritarian governments, present and future, to track transactions and indeed force or prevent transactions.

I am not a fan even if the pitch is made with a colorful brochure. I am more concerned about why a former acting CIA director thinks it is a great tool for government intelligence.



  1. The block chain is a civil asset forfeiture wet dream. If the property commits the crime, and you know every account that the property touched after becoming a criminal...

  2. Meanwhile in India, a law is being proposed and is expected to pass, which will ban mining, exchanging or holding crypto.

  3. Doesn't this cut the legs out from under Yellen's expressed fears about cryptos being used for criminal activity?

  4. Monero is a cryptocurrency that emphasizes privacy. Granted this is from what I've heard from others, having never bothered to get into it myself. From what I know of Bitcoin, even if you use tumblers it can still be traced with enough computing power.