In this Vox Q&A, a former US cybersecurity official explains the shady way that North Korea continues to fund its nuclear and missile programs.
The US keeps imposing new sanctions on North Korea over its nuclear program but they’re not changing Kim Jong Un’s behavior — and for a surprising reason: Pyongyang’s skill at using cryptocurrencies.
Five days ago, America sanctioned dozens of ships, shipping companies, and other firms that allegedly help Pyongyang fund its nuclear and missiles programs. That move is part of a broader US strategy to starve the North Korean regime of money it would use to improve its weapons. The Trump administration wants to make these punishments so severe that Pyongyang would potentially be open to negotiations over the programs.
The problem is North Korea can partially skirt financial restrictions with cryptocurrencies, an online form of money, according to Priscilla Moriuchi, formerly a top National Security Agency official charged with overseeing cyber threats from East Asia.
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Moriuchi estimates that North Korea earns between $15 million and $200 million by creating and selling cryptocurrencies and then turning it into hard cash. (Their take fluctuates depending on the digital currency’s worth when North Korea cashes out.) That’s not enough money to fully fund North Korea’s weapons programs, to be sure, but it ensures they don’t completely shut down.
So even though sanctions hurt North Korea’s physical economy, there are currently few ways America can curb Pyongyang’s growing digital economy. That means North Korea has an even greater ability to keep its nuclear program running than we might think.
“I would bet that these coins are being turned into something — currency or physical goods — that are supporting North Korea’s nuclear and ballistic missile program,” Moriuchi told me.
A transcript of our conversation, lightly edited for length and clarity, follows.
Why is cryptocurrency useful for North Korea?
There are not very many ID or security requirements, and many of these currencies are founded around — or at least very much focused on — security and anonymity for their users.
That kind of makes it a perfect platform for countries like North Korea, which are pretty isolated from the international financial system to begin with, to use this new form of commerce that’s thus far existed pretty much outside of countries’ regulatory control.
How does a country collect, or mine, bitcoin? Is it different from how an individual would do so?
Mining is just the way in which a cryptocurrency is generated.
Creating a single coin requires many computers to solve a number of mathematical problems. And once you’ve solved the problems, then it builds what’s called a block. That block is essentially the currency itself — you get rewards for creating a block.
Anyone can create a block, whether you’re an individual or a country. It tends to be a computationally intensive and energy-intensive process. You need access to a very stable and high-bandwidth internet connection.
Then once you build the block you get the reward, which is typically a reward in that currency.
The US, along with the United Nations, continually sanction North Korea. They usually try to stop North Korea from trading their top exports, like iron, coal, and seafood.
