South Korea’s Growing Yet Vulnerable Crypto Sector at Risk from North Korea: Security Think Tank Warns

North Korea, that is hit by sanctions has been accused of cyber attacks in order to gain financial resources to fund its nuclear and missile programs for which it could exploit cryptocurrencies.

According to British defense and security think tank Royal United Services Institute, the cyber capabilities and financial networks of North Korea pose a threat to the growing but vulnerable cryptocurrency sector of Southeast Asia.

North Korea has been heavily sanctioned not only by the United Nations but also the US and other countries over its missile and nuclear ambitions. The country has also been accused of using cyberattacks to keep its nuclear programs going. The sanctions on North Korea that were in part due to disagreement over sanctions is vitally important for the country to be lifted off them.

North Korea To Continue To Exploit Bitcoin & Cryptos

In a report on Monday as reported by CNBC, London-based RUSI said as a result of these sanctions, the country has shown increasing interest in digital assets. The report further cited 2017’s “WannaCry” global ransomware attack and alleged hacking of crypto exchanges in South Korea.

“As a determined and sophisticated cyber actor in need of financial resources, North Korea is likely to continue to find ways of obtaining and exploiting cryptocurrencies.”

In the past, the country has strongly denied the allegations of cybercrime. Last year, in September, a foreign ministry official called the US the “chief culprit responsible for posing security threats in cyberspace” while denying the involvement in WannaCry attack.

David Carlisle, a former official at the U.S. Treasury Department’s office of terrorism and financial intelligence, and Kayla Izenman, financial crime and terrorist finance expert, wrote in the report titled,

“Closing the Gap: Guidance for Countering North Korean Cryptocurrency Activity in Southeast Asia.”

“North Korea has gone to extremes to raise funds and evade international sanctions, recently expanding these efforts to include the exploitation of cryptocurrencies such as Bitcoin.”

The WannaCry attack, they said

“signaled North Korea’s interest in, and ability to exploit, cryptocurrencies,” and the country’s cyber skills combined with the noose of sanctions and constant need of funds point towards the risk of “sustained security challenge.”

Overseas Financial Networks to Carry Out the attack

The growing virtual asset sector of Southeast Asia along with lack of coordinated regulation presents

“systemic risk.”

“Because Southeast Asia is also host to a growing number of cryptocurrency businesses and users, countries in the region could prove vulnerable to North Korea’s cryptocurrency-related activity as well.”

For instance, North Korea could turn to convert illicit gained digital assets into fiat like the US dollar, euro, yen, and yuan.

“North Korea could cash out its cryptocurrency profits by relying on its extensive overseas financial networks to open and operate accounts at cryptocurrency exchanges in the region,”

the report said.

In Southeast Asia, the report states that Singapore is leading the way in cryptocurrency regulation while Thailand, the Philippines, and Malaysia are working on regulating crypto exchanges according to the guidance provided by intergovernmental Financial Action Task Force.

However, the authors stressed that these countries also need to assess their risk and weaknesses regarding North Korea. And if these measures are carried out in line with global standards with appropriate urgency, these countries can get success in making themselves less vulnerable to the risk of North Korea’s crypto activity.