A report by the independent think tank on international defence and security, The Royal United Services Institute (Rusi), claims that the dictatorial regime of North Korea is using Bitcoin and other cryptocurrencies to fund its nuclear weapons programme. The secretive country has been accused of taking advantage of crypto for some time, and is thought to have successfully targeted Asian cryptocurrency exchanges at least five times from January 2017 to September 2018 with losses estimated at $571 million.
The report was released shortly after South Korean news agency, Yonhap reported that the North Korean leader Kim Jong-un had plans to visit Russia, and some have accused the west of using the report to push their anti-Russian doctrine.
Kayla Izenman, a research analyst who co-authored the paper, said the borderless nature of cryptocurrencies makes it an attractive target for actors “aiming to circumvent the traditional financial system”.
“Given the large amounts of cryptocurrency we’re looking at from these exchange hacks and the possibility of more coming from mining operations, it is reasonable to assume that the money may be directly financing North Korea’s WMD program,” she said.
Regime Using Cryptocurrencies To Raise And Move Funds As Well As Avoid Sanctions
North Korea is subject to extensive international sanctions, including measures imposed by the UN, the US and the EU. Among other restrictions, these measures include prohibitions on the provision of financial services to designated North Korean individuals and entities, as well as entities affiliated with them. To circumvent this, the country has used a number of techniques to raise and move funds.
The US Financial Crimes Enforcement Network (FinCEN), has claimed that although U.S. and international sanctions have “served to significantly isolate North Korean banks from the international financial system, the North Korean government continues to access the international financial system to support its WMD and conventional weapons programs”.
North Korea’s cryptocurrency activity is increasing in value and complexity and is likely to continue as part of sanctions evasion. Priscilla Moriuchi, a former analyst at the US National Security Agency and currently a director at security analysis firm Recorded Future, estimates that North Korea’s cryptocurrency holdings could total between $15 million and $210 million.
North Korea may choose to stockpile cryptocurrencies in order to keep their funds safe as well as allowing them to cash out slowly over a period of time, thereby avoiding detection.
According to the Korean Friendship Association, Pyongyang is currently hosting a Blockchain and Cryptocurrency Conference. Holders of South Korean, Japanese or Israeli passports are banned from attending, as are journalists.