The Dark Side of North Korea's Crypto Hack - The Hidden Dangers

North Korea has been using cryptocurrency for several years as a means of evading international sanctions. One of the first uses of digital coins by the country was criminal, but that’s changing. Last year, hackers stole funds from crypto exchanges, and more recently, the nation’s military was compromised to use cryptocurrencies for espionage purposes. After reading this article, you will discover the dangers of operating in North Korea, as well as some tips on how to avoid them.

How North Korea Got Started With Crypto

North Korea’s interest in cryptocurrency is likely born out of a desire to avoid international sanctions. The country is under an “extended” travel ban, meaning UN members can’t enter the country without a special license. In 2014, the country was also placed under a trade embargo, which restricts the flow of foreign currency. Although the country’s ability to conduct illegal transactions with cryptocurrencies has been hampered by anti-money laundering laws, it has found loopholes to evade sanctions, mainly through mining cryptocurrency. As North Korea is a relatively underdeveloped country, it doesn’t have access to the same level of technology as countries like China, which is why it has turned to cryptocurrency mining as a way to generate foreign currency.

The Dark Side of North Korea's Crypto Hack

Crypto exchanges are tempting targets for hackers. When a digital asset exchange is targeted, it means the hackers are looking to steal funds from customers of that particular exchange. The main benefit for hackers is that cryptocurrency exchanges are online businesses that leave a digital “footprint” that hackers can use to find them online. They can also be very profitable for hackers, simply because they are an online business open to the public. During the most recent North Korean cryptocurrency exchange hack, the hacking group used customer credentials to steal funds from Bithumb, Upbit, and Coinone exchanges. In total, the hackers stole $2.6 million in funds. North Korean hackers stole funds from cryptocurrency exchanges in 2016 and 2017. In 2016, North Korea-based hacking groups stole $571,000 in funds from Newdex and $2.8 million from Bithumb. The following year, after North Korea hacked Bithumb, the funds were transferred to an account controlled by the North Korean government. Security researchers were able to track the hacking group and discover they were located in North Korea. This hack led to the US ultimately approving the Financial Transactions and Reports Analysis Centre of Canada to monitor North Korean financial transactions.

North Korean Hackers Stole Funds From South Korean Exchanges

South Korea is one of the first countries to embrace cryptocurrency, and for a long time, it has been a major target for hackers. In September 2017, more than $1 million in funds were stolen from Coinlink, a South Korean cryptocurrency exchange. But that wasn’t the only hack. In February 2018, Coinone was hacked, with $13 million in funds stolen. The major difference between these two hacks was that Coinlink was responsible for safeguarding customer funds. Coinone, on the other hand, was an exchange that only handled the trading of cryptocurrencies. South Korean financial institutions play a role in cryptocurrency regulations and investor protection. But the government’s ability to monitor and protect its citizens is limited. To combat these types of attacks, exchanges must follow strict cybersecurity guidelines, including a strict Know Your Customer (KYC) policy. In addition, they must ensure customer funds are stored in a cold wallet to prevent hackers from using a breach as an opportunity to steal funds. Also read this article for more information.

Conclusion

North Korea has been using cryptocurrency for several years as a means of evading international sanctions. Now, the country’s military has been compromised to use cryptocurrency for espionage purposes.

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