Is North Korea’s crypto-funded nuclear programme at risk following FTX collapse?
- North Korea has for years relied on stolen cryptocurrency to fund its expanding nuclear arsenal
- While it is difficult to tell how much it has lost following the crash of FTX, experts estimate Pyongyang’s crypto haul has lost 80-85 per cent of its value
But with the general downturn in the cryptocurrency market, coupled with the recent FTX collapse and myriad other pitfalls, analysts estimate North Korea has probably lost most of its cryptocurrency haul.
Can we expect its development of nuclear weapons to come to a halt, or slow down? It seems unlikely.
What North Korea’s hackers have been up to
While nobody knows exactly how many North Korea-backed hackers there are, experts have estimated Kim Jong-un has between 6,000 and 7,000 working both inside and outside the country.
North Korea has invested in its national cybercrime arsenal for some 15 years. It is almost impossible for an organisation to defend itself against an army of this size and calibre once it comes charging.
North Korean hackers stole US$400 million in cryptocurrency
For context, it is estimated that North Korea only earned about US$142 million from trade exports in 2020.
Okay, so how much has it now lost?
It is difficult to say exactly how much cryptocurrency has been stolen (and used) by North Korean hackers, and therefore how much might remain.
In June, blockchain analyst Nick Carlsen, who used to be an analyst for the FBI, told Reuters that one of North Korea’s cryptocurrency caches had lost 80-85 per cent of its value in a number of weeks, falling to less than US$10 million.
Losses will have intensified following the FTX collapse. According to a Chainalysis report, in January North Korea held about US$170 million in stolen unlaundered cryptocurrency, taken from 49 hacks conducted from 2017 to 2021. The report also claims Ether was the most common cryptocurrency stolen by North Korea in 2021, making up 58 per cent of the total theft.
Ether’s value fell by more than 20 per cent following the FTX crash and remains low. It is reasonable to expect North Korea will wait before cashing out. When it does, experts looking on will be in a better place to figure out how much it has.
Why steal cryptocurrency to fund nuclear weapons tests?
Cryptocurrency remains unregulated by most governments. At the same time, transactions can be made quickly and allow more anonymity than transactions made through traditional banking systems.
It is also easier to hack a cryptocurrency exchange than it is to hack a bank. The latter is almost always bolstered by advanced security barriers and sometimes require in-person appearances.
No more missile tests, for now?
The rapid drop in crypto’s value, compounded by the FTX crash, will have certainly left a dent in North Korea’s nuclear military expansion funds. Nonetheless, Kim Jong-un’s cybercriminal army is likely to find new sources of illicit income and will probably keep stealing cryptocurrency too.
North Korea has also had financial support from supporters in South Korea who follow the “Juche” ideology – the same Marxist-Leninist-adjacent political philosophy imposed in North Korea.
As long as North Korea can glean financial benefit from China, and other avenues as mentioned above, it is unlikely to stop its plans.