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Cyber crimes, North Korea and crypto: should we be worried?

By Connor Freitas
October 23, 2019, 7:38 PM GMT
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    Facing punishing economic sanctions, the secretive state has allegedly been behind sophisticated cyberattacks targeting crypto exchanges and banks

    Cyber crimes, North Korea and crypto: should we be worried?

    A North Korea crypto conference is being held in February 2020 — a week-long extravaganza in Pyongyang where experts from the blockchain and crypto industry are being invited into the isolated state to “discuss business opportunities and sign contracts.”

    Not many people associate North Korea with cryptocurrency — especially considering that so few of the country’s 25.5 million people have access to the internet. Nonetheless, allegations of cybercrime and the evasion of sanctions by Pyongyang are concerning some — including the United Nations.

    In August 2019 a confidential report by the UN suggested that North Korea has generated about $2 billion through “widespread and increasingly sophisticated” cyberattacks that targeted banks and crypto exchanges. Pyongyang remains subject to punishing economic sanctions for its weapons of mass destruction programme — and it appears that Kim Jong Un’s regime is relying on these hacks to continue funding its ballistic missiles and nuclear capabilities.

    Although North Korea hasn’t launched any intercontinental ballistic missiles of late, with Donald Trump and Kim Jong Un developing something of a strange kinship in recent months, UN investigators claim that this doesn’t mean the programmes have gone away. Development is continuing apace, and there have been a series of short-range missile tests recently.

    What has happened?

    According to the report, there have been at least 35 occasions where actors working on behalf of the Democratic People’s Republic of Korea have attacked “financial institutions, cryptocurrency exchanges and mining activity” to earn foreign currency. The victims stretch across 17 countries.

    Perhaps one of the better-known cases where North Korea has been a suspect is the WannaCry malware attack. Both the US and the UK officially blamed Pyongyang after banks, businesses and hospitals were crippled by the incident in 2017. Britain’s National Health Service was particularly affected — with medical appointments and surgeries cancelled at short notice at a cost of $112 million. Infected Windows users were locked out of their files, and told to pay a ransom in Bitcoin to access them again. The European Union crime agency Europol went so far as calling the attack “unprecedented.”

    In September 2017, three North Korean groups allegedly connected to the WannaCry scandal — the Lazarus Group, Andariel and Bluenoroff — were subject to economic sanctions by the United States Treasury. The agency claimed that all three groups are controlled by Pyongyang’s main intelligence bureau.

    Their fingerprints have been detected on a number of other devastating cyberattacks. In 2014, Sony Pictures was hacked — and sensitive information about employees, salaries, details of upcoming movies and even copies of unreleased films ended up making their way into the public domain. It’s perhaps telling that one of the hackers’ main demands was for Sony Pictures to halt the release of The Interview, a Seth Rogen comedy that centres on a plot to assassinate Kim Jong Un. The company relented to some extent — choosing to take the movie straight to streaming platforms — in part because there was a threat of terror attacks at cinemas that screened it.

    In what could amount to a potentially alarming geopolitical development, North Korea also seems to have taken a liking to hacking crypto businesses in neighbouring South Korea and other Asian economies. The Bithumb exchange was hacked twice in 2017 and 2018, resulting in losses of almost $40 million. It has also been claimed Pyongyang may have been behind the theft of $530 million from Japanese exchange Coincheck, which was one of the biggest crypto heists in the industry’s short history.

    North Korea and cryptocurrency: a new coin?

    It might be worth keeping an eye on North Korea’s cryptocurrency conferences going forward, as reports suggest it is considering developing its very own coin. If true, Pyongyang would be joining China in pursuit of a digital currency. In September 2019, one of the regime’s representatives told Vice News that the state was in the early stages of creating a cryptocurrency that would resemble Bitcoin. Unlike Beijing, which wants to tie its asset to the Chinese yuan, it appears unlikely that Pyongyang would peg its digital currency to the North Korean won.

    North Korea often makes it into the headlines when Kim Jong Un is on horseback in the mountains. But as the weapons of warfare transition from Kalashnikovs to keyboards, security experts are urging the world not to underestimate the capabilities of his regime.

    Tokenised securities are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how tokenised securities and leverage work and whether you can afford to take the high risk of losing your money. Nothing in the above article should be regarded as a recommendation to trade generally, to trade on a particular platform or to trade in a particular asset. Asset prices can go down as well as up and past performance is not a guide to future performance. Investors and traders should thoroughly research an asset or strategy before making any trading or investment decision and if necessary seek professional advice.

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