Why is North Korea stealing cryptocurrency?

Credit: South China Morning Post

With North Korea crypto-hacking $2 billion, we ask a Brit who visited the country how they are capable of this and if Western perceptions of the nation are true

The West only sees what North Korea wants it to see. We view the country through a lens, shaped by our news reports, our satire and the country’s own propaganda. It looks like a military-driven, impoverished dictatorship but is touted by the government as a self-reliant, socialist state not to be messed with. The truth is perhaps not as black and white as either Korea’s own projections or our own perceptions.

This makes its relationship with technology a fascinating one. A country who seem more interested in nuclear weaponry than the power of deep learning, what is North Korea’s place at the table of tech? One would naturally assume that the country will spiral further into poverty as more extroverted, wealthy countries develop more impressive technology.

However, North Korea has been stealing cryptocurrency. The idea of the state exploiting cybersecurity in order to one-up their neighbours is a strange one; a nation routinely parodied for being backwards and unwilling to move with the times, ingeniously scamming their supposedly more advanced neighbours seems like a tactic the North Koreans just wouldn’t employ.

Several media outlets have reported that that North Korea has stolen as much as $2 billion, with “widespread and increasingly sophisticated” cyberattacks on cryptocurrency exchanges. The hackers attacked neighbours South Korea a reported ten times, India thrice and Bangladesh and Chile twice each.

The republic has been linked with a string of digital currency thefts over the years. It certainly doesn’t resonate with its image, even to those who have visited.

Is North Korea a secret technological hub?

“I didn’t spot anything which would give me any insight into [North Korea’s] technology,” says Tom Higgs. “Whilst they are making strides in warfare, nobody I saw carried a mobile phone or used state of the art computers in the university.”

Tom is from Oxfordshire in the UK. He visited the country in 2014 and now lives in Taiwan. “They’re beginning to develop hotel resorts for skiing and general R&R, but even Pyongyang is in dire need of upgrading,” he says. North Korea is not a centre for technological progress like its southern neighbour and there are no hints of it even for tourists or those who go to work in the country.

The cryptocurrency attacks were carried out by stealing not just from exchanges but users too. The attackers honed in on virtual currencies such as bitcoin, a departure from previous methods of targeting financial institutions. “Previously, hackers directly attacked exchanges,” Simon Choi, the founder of the cyber warfare research group IssueMakersLab, told South China Morning Post. “They targeted staff at the exchanges, but now they are attacking cryptocurrency users directly.”

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North Korea has to appear to be a monolithic superpower intensely proud of their country to maintain that appearance.

Tom Higgs

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In one attack, hackers accessed the infrastructure managing an unnamed nation’s entire ATM system, installing malware and modifying the way transactions were processed. South Korea’s cryptocurrency exchange, Bithumb, was targeted at least four times. Two attacks in 2017 resulted in losses of around $7 million each: two more in June 2018 and March 2019, claimed another $31 million and $20 million respectively.

North Korea only has two internet connections into the rest of the world. The state is estimated to have between 3,000 and 6,000 hackers trained in cyber operations according to a report by the Congressional Research Service. Promising mathematics, science and technology students in the country are believed to be fast-tracked to universities to learn about hacking, before moving overseas. How are they keeping this under wraps?

“It’s inevitable that some cracks appear in what they want to show you, like poverty visible near the railway into the country and frequent power cuts,” says Tom Higgs of his visit to North Korea.

Why is North Korea hacking other countries?

It’s estimated that nearly half of North Korea’s 25 million-strong population are malnourished. Sanctions on the country have limited its income and hacking is one way to bring in extra money.

It would be optimistic to imagine that Kim Jong-Un is stealing from the rich to feed the poor; the reality may be closer to the Western vision of the country’s obsession with weapons though. On his trip to North Korea, Tom found that the locals did not discuss the military openly with tourists.

“If you try to confront them about how many are in the army, famine or their nuclear arsenal, it will trigger unease in them and [they] will either deflect or say ‘I don’t know’,” he says. “The guards are human but they have to toe the party line and only speak positively of the country. They are reminded of the personality cult of the Kim family through badges and banners and political music played in public spaces, though how they truly feel inside is open to guesswork.”

A report to the U.N. Security Council North Korea sanctions committee claimed that the stolen money will be used to fund a new WMD (Weapons of Mass Destruction) program. Is a new era of destruction just around the corner? How does this affect the historic 2018–19 Korean peace process talks?

“A big concept in Asia is ‘face’, and admitting poverty and famine is a complete loss of that,” says Tom. “They [North Korea] have to appear to be a monolithic superpower intensely proud of their country to maintain that appearance. Telling lies to save face is acceptable in this way, so going back on [previous] deals to serve their own interests adds to that.”

Tom doesn’t believe however that the nation’s military poses much of a threat on the world stage.

“They [North Korean citizens] said they wouldn’t be afraid of striking out against America or the South, even if they don’t want a battle,” he says of his time in the country. “Obviously this is delusional because their weaponry is predominantly Soviet-era and frequently fails. The biggest problem wouldn’t be the bloodloss on both sides, but the influx of refugees into China and the south, and the sheer cost of upgrading what is crumbling, dated infrastructure.”

The future of North Korea seems to be constantly teetering on political uncertainty. The role that cryptocurrency is playing in the country’s finances is a fascinating juxtaposition of what the West knows of the nation’s culture; perhaps though, we just don’t know as much about North Korea as we thought we did.