According to a Reuters report, North Korea's massive weapons testing program has been hampered by the recent drop in cryptocurrency prices.
According to a UN investigation earlier this year, North Korea has supported the Lazarus group, which has committed massive cyber heists across the globe. These attacks have focused on siphoning away cryptocurrencies to the tune of hundreds of millions in every assault, which the UN report suggested was being used to finance the country's weapons testing program.
North Korea has denied these accusations and even called them U.S. propaganda. However, for a country that is subject to severe sanctions and cannot officially trade with most regions of the world, there are only few avenues to make quick money, and cryptocurrency heists are one of them.
Is North Korea using crypto heists for weapons development?
North Korea's formal trade income in 2021 is expected to be $58 million, while the country invests around $640 million annually on its nuclear arsenal. Although the country's gross domestic product is estimated to be $27 billion, the country also generated $2 billion through cryptocurrency heists in the years preceding 2019.
North Korea has been smuggling coal across sea routes and increasing the frequency of cyberattacks in order to keep its economy running. Earlier this year, in one of the largest heists in crypto history, the blockchain project Ronin was attacked and $615 million worth of crypto was stolen. Authorities in the United States linked this back to Lazarus.
Because North Korea does not own these alt coins informally, digital experts told Reuters that it must go through maneuvers such as converting them to a different digital currency in order to keep its hands clean from the transaction.
North Korea is unable to pay for its weapon development in cryptocurrencies either, and it must also negotiate with companies that will accept huge sums of crypto coins without asking for them, and pay them in cash. Shady transactions such as these offer little market value, and only a third of the stolen value is likely to be utilized for weapon development.
When the crypto market crashes, what happens?
When crypto markets were bullish, North Korea-sponsored cyberattacks could make money. However, in the past few months, crypto markets have fallen dramatically.
Analysts on the blockchain told Reuters that even in the unlikely event that North Korea retained its gains from these heists, the value of their holdings has decreased by as much as 85 percent. What might have been worth tens of millions of dollars in 2021 is likely to be less than ten million at current market rates.
In such a scenario, extensive cyberattacks to steal cryptocurrency may not be a viable option. In recent months, cybersecurity companies have noticed more 'phishing attempts' on conventional banking systems. In the latter, hackers attempt to fool recipients into giving away sensitive information, such as bank account numbers and associated passwords.
The days of Lazarus-like heists are far from over. Experts told Reuters that cryptocurrencies are a critical component of North Korea's effort to avoid international sanctions. Like many crypto enthusiasts, the country is hoping that the markets will take off once more.