Former Deputy Director of the CIA in the US writes: Illegal activities involving Bitcoin are greatly exaggerated, blockchain is an excellent tool for investigation.
The Crypto Council for Innovation recently commissioned a research report by a former deputy director of the CIA, which highlighted the overstatement of Bitcoin's use in illicit activities and emphasized the efficiency of blockchain analysis in law enforcement and intelligence gathering.
The Crypto Council for Innovation was established this month and includes members such as Fidelity, Square, Coinbase, and investment firm Paradigm. Despite the industry-backed nature of the council, former CIA deputy director Michael Morell supported his views with empirical data.
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Exaggeration of Illegal Use Cases of Bitcoin
In a research report titled "Analysis of Bitcoin in Illicit Finance" by Morrell, data from blockchain analysis firm Chainalysis shows that the percentage of Bitcoin used in illegal activities is extremely low, dropping below 1% after 2016.
Comparatively, Morrell points out that illegal activities conducted through traditional financial institutions are estimated to account for 2-4% of the global GDP:
Financial Crimes Enforcement Network (FinCEN) data includes Suspicious Activity Reports (SARs) of over $300 million, growing at a rate of $20 million annually. While not all SARs represent illegal activities, a majority of them do.
Outstanding Data Collection Tools
Blockchain data analysis firms like Chainalysis, CipherTrace, and Elliptic have left a deep impression on Morell. He stated:
With Chainalysis' assistance last November, the IRS was able to track $1 billion worth of illicit activities from the original darknet Silk Road. Utilizing blockchain technology allows for tracking known criminal activities and identifying previously unknown criminal activities.
He believes that the blockchain ledger recording all Bitcoin transactions is an underutilized forensic tool that law enforcement and intelligence agencies should make more widespread use of.
The U.S. Cannot Afford
Having worked at the CIA for 33 years, Morell, prior to the report's release, gave an interview to Bloomberg and expressed his views on European Central Bank President Christine Lagarde and U.S. Treasury Secretary Janet Yellen, whom he initially considered to be the most insightful people on the planet, only to find his analysis proved otherwise.
He pointed out:
If the U.S. continues to waste energy and resources chasing shadows without leveraging blockchain technology, it will face serious geopolitical risks in competition with China.
He concluded that it is imperative to ensure that traditional notions like illegal use of Bitcoin do not hinder America's technological advancement, in order to stay in sync with China.