Economic Tradecraft

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.