N. Korea Feels the Pinch as Value of Stolen Crypto Plunges Amid Weapon Tests

North Korea is experiencing hardship after the crypto crash wiped off millions from its stash of stolen digital assets. Reuters reported on June 29, citing four digital investigators. According to the investigators, the bear market threatens a key funding source for Pyongyang and its weapons programs.

Allegedly, North Korea has invested heavily in sophisticated crypto hacking groups over the years. As a result, the country has become a significant threat, successfully orchestrating multiple high-profile attacks on the crypto space.

An example is the exploit of Axie Infinity’s Ronin Bridge, which saw hackers walk away with around $615 million. According to US officials, the funds from the attack ended up in a Lazarus -owned Ethereum (ETH) address. Lazarus is a hacking group which the US believes has the backing of North Korea’s Reconnaissance General Bureau.

Blockchain analytics firm Chainalysis, which works with the US government, claims the value of North Korea’s stolen crypto holdings has plummeted. Between 2017 and 2021, North Korea orchestrated 49 attacks, according to the firm. However, the value of the obtained tokens has plunged from $170 million in January 2022 to $65 million now.

Nic Carlsen, an analyst with US-based TRM Labs, shares a similar narrative. According to him, the value of the proceeds from a 2021 heist by North Korean hackers has fallen nearly 85%. Carlsen claims the holdings are currently less than $10 million. 

North Korea Trades Stolen Crypto at a Discount

While cryptos account for a puny fraction of North Korea’s finances, they play a significant role in its weapons program. For instance, sanctions monitors reported that the country secured around $2 billion for the weapons program through cyberattacks.

The Korea Institute for Defense Analyses in Seoul estimates North Korea’s weapons tests have consumed $620 million year-to-date. Despite facing an economic crisis, North Korea plans to resume testing its nuclear weapons.

However, the recent crash prevents North Korea from cashing out. This is because the nation stands to gain close to nothing by selling its crypto as the market bleeds.

Per Aaron Arnold of the RUSI think-tank in London, North Korea only gets a fraction of the crypto it steals. With the country facing multiple sanctions, it must use brokers willing to take its crypto without questions. Consequently, the brokers take a massive cut of the funds for the risks they take.

Moreover, the country cannot avoid using brokers because most of the fiat-traded products it wants to buy.

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The inability to cash out might affect the funding of Pyongyang’s weapons programs, according to two South Korean government sources. The sources demanded anonymity to divulge this sensitive information. 

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