My Experience with Bitcoin and Challenging Conventional Wisdom

| Michael J. Morell
Michael J. Morell
Former Acting Director, CIA

As Bitcoin and other cryptocurrencies rise to record levels ahead of the direct offering of crypto exchange Coinbase, former Acting CIA Director Michael Morell is pushing back against conventional wisdom that says Bitcoin is ripe for illicit activity. 

In a report sponsored by the Crypto Council for Innovation (a lobbying group created by Coinbase, Fidelity Square and Digital Assets), Morell argues that Bitcoin isn’t any more exposed to illicit use than other forms of currency.

The Cipher Brief talked with Morell about his findings and how they intersect with national security.  During his 33-year career at CIA, Michael Morell served as Deputy Director for over three years. Michael also served twice as Acting Director.

The Cipher Brief:  What led to your interest in Bitcoin and to researching whether Bitcoin is more vulnerable to illicit activity that you discuss in your report?

Morell: I was seeing, not infrequently, references to crypto in general – Bitcoin in particular since it dominates the crypto market – and references to these ecosystems being rife with illicit activity. Not only was I seeing references to that, but some very senior officials in various venues are actually saying it. Treasury Secretary Janet Yellen, at her confirmation hearing said, Bitcoin, was used primarily by illicit actors. So, I was interested in whether that was indeed right or not. I cared for two reasons. I cared because I’m still very much interested in protecting the country, and if these things are rife with illicit activity, people should know that. But I also cared because we’re in this competition with China and part of that competition is over certain key high technologies of the future. One of those is financial technologies. One of those is alternative payment systems. When you go to some places in Africa today, there are signs in restaurants that say, “We only take WePay,” or “We only take Alipay,” both are Chinese alternative payment systems. So fintech – financial technology – is one of those technologies that matters in this competition between the United States and China. So, if these claims about Bitcoin and illicit finance are not true, if they’re inaccurate and people are still spreading that message, it’s going to hold us back in that competition with China when it shouldn’t. That was the reason I became interested because if these claims are overstated, I want people to know that so that we don’t get held back in this broader competition with China.


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The Cipher Brief:  What were some of the things that surfaced when you and your co-authors started digging in on this that you maybe didn’t expect?

Morell:  Great question. When I went into this, I assumed the conventional wisdom was right. I assumed that because I was just reading so much in the open media about Bitcoin being sent from France to the United States helping to fund a couple of the January 6th insurrectionists. Or I saw articles from time to time about crypto being used in an illicit way, so I kind of assumed because I read that stuff for a couple of years, that the conventional wisdom must be right. I assumed that people like Janet Yellen and Christine Lagarde, President of the European Central Bank, must be the best-informed people on the planet on this stuff. So I assumed it was right.

But when we started to actually look at studies, people who had studied this issue in a serious way, and we started talking to experts, we couldn’t find a single person who supported the conventional wisdom. In fact, we could only find people who said the conventional wisdom is uninformed. When you look at the data and you look at the facts, there is less illicit activity in Bitcoin than there is even in the traditional banking system and certainly much less than there is in cash. So that was a surprise. I think the other surprise to me was that I didn’t know a lot about the blockchain as a technology, and I learned a lot more and it was a surprise to me that the blockchain, because it records every single transaction for everybody to see and it never goes away, has real power from an intelligence and law enforcement perspective.

The Cipher Brief:  That’s a game changer?

Morell: It’s a game changer. One of the people we talked to said, “This is a boon for surveillance.” There isn’t a better surveillance tool available than this thing called the blockchain.

The Cipher Brief:  There’s a quote in the report that says the growing use of blockchain forensics will essentially be the counter-terrorism equivalent of Osama bin Laden never again using a phone for the rest of his life after learning that the US government could listen to his calls. I think this is really interesting because this brings it home for a lot of people who do think the technology is complicated and don’t really understand all the ins and outs of Bitcoin. Can you make a connection for us to how you think this type of technology is connected to national security moving forward?

Morell:  A great example, and one of the things that people are worried about, is terrorists using Bitcoin or other cryptocurrencies to fund their activities. It turns out that there’s not much of that happening. I think the important point is – and how it relates to the bin Laden quote – is that the more that illicit actors – including terrorists – learn about the law enforcement and intelligence power of the blockchain, the less they’ll use cryptocurrencies in an illicit way. They’ll be driven away from the use of crypto just the way bin Laden was driven away from the use of a cellphone or a landline.

The Cipher Brief: What does this mean moving forward? How should we be thinking about this when we think specifically about national security issues?

Morell: Two things. One is that I really hope this starts a discussion among experts. I don’t want people to take my report as gospel. What I really hope is that this generates a discussion among experts on this issue. I don’t want Janet Yellen to read my report and say, “Okay, he’s right. Issue over.” What I want her to do is possibly read my paper and turn to her experts and say, “Hey, what do you think of this?” That’s one thing that I hope happens.

The other thing that I hope happens is that people will start to question the conventional wisdom on a lot of other things.  You begin to wonder how much other conventional wisdom on issues of national security or any other issue for that matter, is right or wrong. That’s something that I learned in the intelligence business – the importance of always questioning things. I hope this is a little reminder to people that it is important to question the conventional wisdom from time to time.

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The Author is Michael J. Morell

During his 33-year career at CIA, Michael Morell served as Deputy Director for over three years, a job in which he managed the Agency's day-to-day operations, represented the Agency at the White House and Congress, and maintained the Agency's relationships with intelligence services and foreign leaders around the world.  Michael also served twice as Acting Director. Michael's senior assignments at CIA also included serving for two years as the Director of Intelligence, the Agency's top... Read More

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