This piece may seem to be positive for Bitcoin and loudly applauded by the Bitcoin and crypto community, but in fact, it is deeply concerning. Thread: https://twitter.com/MichaelJMorell/status/1381971120841183235

The report surfaces a couple conclusions: "the broad generalizations about the use of Bitcoin
in illicit finance are significantly overstated" and "blockchain analysis is a highly effective crime fighting and intelligence gathering tool... a 'boon for surveillance.'"

That Bitcoin crimes are overstated seems to be consistent with data. However, the argument that it's good that the US can surveil everything is fatally flawed, and ironically, not even in the best interest of a surveillance state.

If US law enforcement can trace and exploit public financial data, so can China, N Korea, Russia and even the very ransomware attackers who the report claims demand ransom in something that protects privacy. This is a massive national security issue.

The report seems to attempt to shift risk from BTC to so-called Anonymity Enhancing Cryptocurrencies (AECs).

The problem is that every cryptocurrency is an AEC. Categories like this are simplistic, not sophisticated. They don’t take into account all the privacy features being added to Bitcoin, Ethereum, Tezos, Litecoin, etc. Privacy is not a binary thing, and it's always evolving.

Most importantly, privacy is good! It means that people and businesses who need to transfer money can do it freely and securely. It promotes human freedom and dignity, and consistent with US ideals of fairness and equal opportunity.

Saying that private crypto helps bad guys is like saying that private Amazon shopping or private email helps bad guys.

US regulators can be effective by regulating the things they have the authority to regulate - the VASP. It’ll be far more effective to make it incumbent on the VASP to take a risk-based approach with EDD and use effective KYC than to try to play whack-a-mole with privacy tech.

If they play AEC whack-a-mole, they’ll lose to fast moving tech - maybe from innovators in the US, maybe from innovators in China.

If they ban self-custody, they’ll lose to sophisticated and distributed options elsewhere and they’ll further widen economic gaps between the have and have-nots.

If they mandate immutable public transparency for all financial transactions, they’ll lose the US, as all the world will surveil and exploit US citizens.

We should support Bitcoin and protect our right to use it! But regulators can also support security by encryption, empower VASPs to reasonably comply with regs, & use a bevy of non-exploitative tools within transparent and human rights-protecting frameworks to combat crime. fin.