Cryptocurrencies were designed in order to discard the role of central banks and governments. It was primarily designed in reaction to the 2008 crisis. By removing third parties, it lessens the cost and can even potentially bypass territories. Cryptocurrencies have been used by countries such as Venezuela and Iran primarily to circumvent US sanctions.
And also, North Korea has been known for cases of hacking. There were two reports that were released by Group-IB and Recorded Future. Both reports pinpointed North Korea supporting hacks of crypto trading platforms and running crypto exchange scams. In fact, it has also been responsible for running a fully-functional coin that is eventually revealed as a scam.
The report by Recorded Future is entitled “Shifting Patterns in Internet Use Reveal Adaptable and Innovative North Korean Ruling Elite”. In this particular report, North Korea is suspected of running two altcoin scams. The first scam coin was called the Interstellar Coin. It was founded in June 2018 by Insikt Group. It has already been rebranded a number of times under different names including HOLD, HUZU, and Stellar. HOLD has been delisted by a number of exchanges already because of its practices.
The second coin is called Marine Chain coin. It was discovered in a number of Bitcoin forums around August 2018. The idea behind the Marine Chain coin is to enable the tokenization of maritime vessels. It has been declared a fraud in Ontario, Canada.
Hacking More Than Half a Billion
North Korea is also responsible for stealing more than $571 million in cryptocurrencies since early 2017 according to a report. That is a large chunk of the entire amount of funds that were stolen between 2017 and 2018 according to Group-IB. According to reports, the total amount of funds stolen between those months reached $882 million.
The cybercrime group Lazarus has been responsible for doing the attacks on crypto exchanges. There is also the potential involvement of the group in the hack of South Korean crypto exchange Bithumb.
Vulnerabilities online are usually the reason why hacking incidents happen. Instead of taking funds in cold storage aka offline, the crypto exchange still keeps cryptocurrencies online that leaves it vulnerable to hackers.
Japan chose to impose stricter rules and regulations when it comes to crypto exchanges in order to prevent these hacking incidents to happen. And recently, it has allowed the industry to self-regulate with an association of crypto exchanges. So far, there are hundreds looking for an opportunity to operate in Japan but the country hasn’t approved any new exchange yet. In fact, there were even existing exchanges that were slapped with notices for improvement.
Could this be the best approach to fight North Korea’s attack on crypto exchanges? There is no denying that it is quite hard to police the industry today. And for this reason, it is important for countries to have a set of rules that regulate the crypto market. In 2018, though regulatory changes caused the crypto industry to go bearish, it is a necessity, in the long run, considering the scams and the challenges that the market faces.