North Korea seeks bitcoin mining to finance regime

By Park Hyong-ki

North Korea is highly likely deploying malicious software that enables its army of cyber hackers to "illicitly" mine and gain bitcoins without a trace, analysts claimed.

Given Pyongyang does not have the computer firepower, it is most likely targeting bitcoins as a means to finance the Kim Jong-un regime amid U.N. sanctions, they added.

"In general, there are two main ways to mine bitcoins. One involves custom hardware, cheap electricity and a fast internet. The other is to develop malicious bitcoin mining software, which is deployed onto victims' computers," said Tara O, an adjunct fellow at the Pacific Forum, a Hawaii-based foreign policy research institute.

"We know that North Korea lacks electricity and a fast internet. So it is probably the latter method."

A report by the state-run Korea Development Bank (KDB) economic research center said that the general public in North Korea is not very knowledgeable about cryptocurrency trading.

Therefore, it added only a few with "special computer skills" can mine and trade bitcoins under the direction of the regime, citing another report by Recorded Future, a U.S. tech company that provides intelligence concerning national security and cyber threats.

A high level of bitcoin mining from North Korea had been detected in May and June, according to Recorded Future. It added it is most likely the regime ordered its army or intelligence officers to do so by taking advantage of the easy transactions and anonymous trading systems.

North Korea had been said to have mostly mined the Monero cryptocurrency. However, Pyongyang has been doing it "on a small scale."

Also, given the North's lack of internet infrastructure and a decentralized system, the KDB report said, "It is expected to continue mining digital currencies in the face of stronger international sanctions, not for the sake of generating value from developing digital currency trading."

Traders can earn bitcoins by solving algorithmic problems, which are, in simpler terms, mathematical questions. This process is called mining, according to the KDB economic center.

Analysts say the international community remains helpless against the North's increase in bitcoin mining because there is not a global legal framework yet that can address security issue concerning a nation misusing digital currencies.

The only thing markets that allow bitcoin mining and trading can do for now is increase their vigilance and implement pre-emptive measures against potential threats to their financial security.

"My reading of the situation is that North Korea is desperate for funds and hard currency. It will do anything to earn income and circumvent the international sanctions placed on it. Bitcoin mining is just the latest in a long string of illegal and legal fundraising attempts by the Kim regime," said Nah Liang Tuang, a research fellow at Nanyang Technological University's (NTU) S. Rajaratnam School of International Studies.

"However, I do not see what legal recourse the international community has to stop North Korea from this latest money generating venture since, to my knowledge, sanctions leveled against the North do not address cryptocurrencies."

The KDB center noted there are very few bars and restaurants in North Korea that accept bitcoins as payment.

A tourism agency in North Korea announced early this year that it will launch its own cryptocurrency for use in the travel industry there. This was apparently to attract foreign tourists to the country.

Also, a tech company there claimed it has developed a bitcoin trading chart.

Cryptocurrencies have been gaining attention amid the rise of blockchain technology, which enables easy trading and a lot more privacy protection. But the downside of it is it consumes a lot of power.