South and North Korea can be separated by a border only 2.5 miles wide, but the two nations could not be more different, at least when it comes to crypts. South Korea has emerged in recent years as one of the largest encryption centers in the world, with the BTC-KRW market (won Korean) which is the fourth largest among the national fiat currencies. In contrast, most North Koreans have almost no knowledge of cryptocurrencies, even though their government has engaged in bitcoin mining and hacking cryptographic exchanges in an attempt to secure an alternative revenue stream.
As the following analysis will explain, this marked divergence is a product of similarly divergent conditions. South Korea is the 11th largest economy in the world and is at a high level in more than one global index of innovative nations. Meanwhile, North Korea is one of the poorest nations in the world, with a GDP estimated at around $ 40 billion. Moreover, its situation is not helped by the fact that it is governed by a totalitarian, one-party government, which makes all enterprises unique, but impossible, and which is subject to a series of international sanctions.
However, it is this combination of autocracy, sanctions and poverty that, quite interestingly, has led the North Korean government to encrypt as a means of sustaining itself and pursuing its own ends. Which shows that just as individuals in developed nations sometimes use cryptography to circumvent national laws, isolated outlawed states such as North Korea use it to circumvent international laws.
The relationship of South Korea with the crypt is largely comparable to that of other rich and developed nations. And in terms of popularity among traders and the general public, cryptocurrencies have done very well in the East Asian nation, with cryptographic exchanges such as Bithumb and Coinplug launched as early as 2013.
As an indication of how quickly the market grew in South Korea, CryptoCompare recorded a 24-hour BTC trading volume of only 5.33 Bitcoin on December 10, 2014 on such Korean trades as Bithumb. On the contrary, January 5, 2018 witnessed a volume of 24,332 of 32,395. In other words, there is an extraordinarily healthy cryptographic market in South Korea, as indicated by the fact that as many as 31% of Korean employees said they invested in cryptocurrencies in a survey published at the end of 2017.
This is also confirmed by the strong position of many South Korean crypts-exchanges. According to CoinMarketCap, Bithumb is the second largest market for Bitcoin (behind Binance), while it is the fifth largest overall exchange in terms of 24-hour volume. In addition to this, Upbit, Coinone, Korbit and GOPAX currently represent the 7th, 48th, 59th and 76th largest daily trades in the world.
And according to a Bithumb source who spoke anonymously to Quartz at the beginning of the year, such exchanges have the means and resources to keep growing:
"They have so much money to buy the newer and better things, they can throw money on the servers, spending $ 40,000 to $ 50,000 on a server is not a problem for them."
They are also helped by the fact that, for economic and cultural reasons, the South Koreans have become almost obsessed with cryptography, with the source reporting that Bithumb can have up to 100,000 users who buy and sell on his exchange at any given time. "It is a fact that so many South Koreans trade on a minute-by-minute basis," he said, before adding that this enthusiasm eventually worked for Bithumb and exchanges like this, "They have more or less had luck in terms of growth and know how to throw money on the problem ".
While South Korea's position as one of the most innovative nations in the world has undoubtedly helped to reach such a peak, the situation for traders and cryptic exchanges has been made more difficult recently. As of September 2017, the South Korean government has begun to crack down on various aspects of the crypto industry, with the first victim as Initial Coin Offerings (ICOs): the financial authority of the nation – the Financial Services Commission (FSC) – announced that it would earn money by selling illegal virtual currencies, following in the footsteps of China, which it prohibited ICOs at the beginning of the month.
The FSC stated in a statement that it will ban "all forms of Initial Coin Offerings regardless of the use of a certain technology or a certain name". Explaining the reasoning behind the move, Vice President Kim Yong-beom said:
"There is a situation where money has been flooded in an unproductive and speculative direction".
In the months that followed this announcement immediately, things went worse for the crypt. It also emerged that the government was planning to ban cryptography exchanges, citing the argument that cryptography is a "deceptive" practice. Fortunately, the president of South Korea, Moon Jae-in, quickly moved to quell these reports, saying in January that there will be no ban on the negotiation of cryptocurrencies. However, even with his intervention, the government followed its plans to ban anonymous trading, with Korean exchanges implementing anti-money laundering measures (AML) on January 30th.
Since then, there have been a number of other government actions aimed at strengthening the regulatory regime, yet they have generally had the effect of further legitimizing the crypto industry, thus making the encryption business more favorable to the consumer and popular.
In April, the Fair Trade Commission (FTC) ordered 12 Korean trades to update their contracts to provide more protection for customers. A month later, the FSC adhered to an investigation conducted by the Financial Supervisory Service (FSS) in a series of exchanges and how they comply with anti-money laundering legislation (AML). Although this may seem like bad news for such exchanges, the leaders of both the FSC and the FSS have recently expressed positive feelings about cryptocurrencies and blockchains. "Regarding cryptocurrencies, there are some positive aspects," said Yoon Suk-heun, when he was confirmed as the new governor of the FSS in May, and when he revealed his intention to oversee the relaxation of the cryptic regulations of South Korea.
Rules of loosening
And it seems that it is so there is a political will not only to reduce regulations in South Korea, but to support the development of blockchain and cryptocurrency industries. In May, it emerged that a number of South Korean lawmakers were planning to challenge the government's ban on ICOs after filing a bill in the national parliament proposing to legalize ICOs that met certain criteria, such as managing public organizations and research groups. Following the introduction of this bill, the government announced its intention to overturn its ICO ban, even if this intention has not been implemented so far.
However, the South Korean crypt industry has received a lot of good news since the end of May. In June, the Bithumb investigation ended, with the government finding no evidence of irregularities in the exchange. Later in the month, the FSC proposed to make AML rules more rigid for trade, something that would primarily serve to clean up their image, while the Ministry of Science revealed that it would raise over $ 200 million in funding for the development of various blockchain projects.
While all this government drama took place, the popularity of the cryptocurrency in South Korea remained strong, despite a decline in interest after the December-January frenzy. According to CryptoCompare, the monthly KRW-BTC volume was KRW 80,7 billion on June 1 (about $ 71.5 million), with intermittent increases on dates such as June 10 and July 24, when monthly volumes were 121 , KRW 7 billion (about $ 108.7 million) and KRW 145.4 billion (about $ 129.9 million) respectively. Meanwhile, some sources (for example, the CEO of the South Korean crypt investment fund Hashed) reported that as many as 50% of Korean professionals had invested in cryptocurrencies.
And it is likely that the climate will remain favorable to the crypts in the coming months and years. For one, drafts of cryptocurrency bills, ICOs and blockchain technology were unveiled at the beginning of July, all with the objective of placing cryptography on a more legitimate and safer plan for investors both professionals and occasional. Secondly, there have been initiatives by private-owned groups and institutions to strengthen the position of the crypt within South Korea, as highlighted in the plans announced in June by the Korea ICT Financial Convergence Association to build the response of the country to the "Crypto Valley" of Switzerland. The president of the association, Oh Jung-geun, said:
"We need a place to focus on the cryptography industry in Korea like the Crypto Valley in Switzerland."
And while Busan's corporate hub has not yet been built, its announcement is perhaps the strongest sign to date that South Korean investors and entrepreneurs are confident that the government will now power cryptography, rather than limit it.
In contrast to the business climate of South Korea, its strong traditions of innovation and R & D, in addition to its population of technology experts, North Korea is perhaps one of the worst environments on Earth for crypts. Not only is it a repressive one-party state in which the economy is predominantly nationalized, but more simply suffers from extremely low levels of internet penetration. According to the Trend Micro IT security company, there are only 1,024 IP addresses in the entire country, compared to 112.3 million in South Korea, 1.6 billion in the United States and 4.3 billion globally.
In other words, there are almost not enough people with access to the Internet to use as cryptocurrencies on a non-negligible scale. So any attempt to measure domestic trade volumes for North Korea and compare them with those of South Korea would be useless, since there is no North Korean cryptocurrency trade, at least not among the general population. And by extension, the government has not announced any policy or part of legislation that aims to trade cryptocurrencies, since there is no need for legislation on a particular activity when this activity does not even exist.
But even if the vast majority of North Koreans have no experience or knowledge of cryptocurrencies, the same can not be said of the North Korean government, nor of research institutions focused on technology. Since last year, Communist state officials have launched a series of high-profile hacks, all with the aim of stealing Bitcoin and other cryptocurrencies. In addition to this, the government has also begun to extract cryptography, indicating that its attraction to Bitcoin, Monero and other digital currencies largely resides with its desire for an alternative revenue stream.
In fact, the United Nations Security Council (UNSC) imposed nine sanctions on North Korea since 2006, while the United States, South Korea, Japan, Australia and the European Union have added their specific injunctions between then and now. According to the Council on Foreign Relations, they are starting to take their toll, with the sole sanction of the UN Council in September 2017 likely to cut about $ 1.3 billion off the GDP of North Korea. And for a country that has a total GDP of $ 40 billion, such a loss makes a noticeable difference.
It is in such a context that North Korea has turned to cryptography, starting from May 2017 with the WannaCry ransomware attack. This attack exploited a bug that affected Windows XP and Windows Server 2003 (which were no longer supported by Microsoft and therefore did not receive a major update in March), using it to infect about 300,000 PCs in over 150 countries, including those belonging to companies and such important organizations as FedEx, Telefónica, Honda, the University of Montreal and the National Health Service of the United Kingdom. The owners of infected computers were asked to pay a ransom in Bitcoin of $ 300 (if they paid within three days) or $ 600 (if they paid within seven), and second to a Twitter bot that tracked down the portfolios associated with the attack, it offset its managers by just over $ 142,000, which was removed from the original portfolios in the space of six withdrawals on August 3, 2017.
However, this was only the beginning of North Korea's incursion into cryptocurrencies, as he was accused of the Bithumb attack in July 2017, in which the leak of personal data allowed hackers to steal over a million of dollars in Bitcoins. South Korean officials also accused him of orchestrating the December 2017 hack on YouBit, which lost 17% of its activities in the violation and had to close accordingly. They have not been told whether he may have been responsible for the happ of April 2017 on Youbit (where almost 4000 Bitcoins were stolen), but since Youbit had to declare bankruptcy after the second attack, it is quite clear that they stole a great triumph of BTC in the next incident.
Speaking with Cointelegraph, McAfee's flagship scientist Christiaan Beek confirms that North Korea's exploits are generally effective, even if they are not particularly elaborate:
"The attacks were successful: for example, the attack on Bithumb resulted in a value of $ 7 million (value of the crypto-currency at that time) .The attackers impersonate public institutions in their phishing campaigns trying to attract victims to open attachments The attacks range from the use of mobile malware to new exploits in Hangul Word Processor (the Korean language text processor used primarily by the South Korean government). The attacks do not seem to be very sophisticated but they show still a series of advanced skills. "
Other cybersecurity experts provide a more heterogeneous assessment of how successful North Korea encryption attempts have been. Fred Plan is a senior analyst with FireEye and suggests to Cointelegraph that, in some cases, the main focus may not involve cryptocurrency theft:
"We do not have enough information to measure the success of these efforts, and it may be the case that the targeting of cryptocurrency-related services is not an attempt to identify the portfolios or the currency itself, but instead attempts to identify additional financial or accounts / information that could allow deeper operations that ultimately have nothing to do with cryptocurrencies (crypts used as & # 39; bait & # 39;). We have seen cryptocurrency related targeting in both ways: targeting encrypted against financial institutions more traditional using baits such as "the latest crypto news" and "investment advice" and the reverse, for example the traditional financial baits that target cryptographic services with recalls such as "tax advice" and fake curriculum ".
Regardless of their main motivations, such incidents are certainly not isolated. In September 2017, FireEye published a report stating that hackers based in North Korea were regularly attempting to hack the South Korean crypts and steal Bitcoin and Ethereum from users. In addition to stating that normal hacking activity had begun around May, the report also found that the attackers mainly used phishing techniques, using fraudulent emails to trick the employees of the affected exchanges into downloading malware that infect their computers. In November 2017, the South Korean Security and Security Agency (KISA) published a similar report, which reported a 370% increase in malware attacks in 2017, as well as 5,366 ransomware attacks addressed to South Korea between January and September 2017.
"Hackers are boldly spreading malicious code not just to drive out Bitcoins but to attack websites directly," said a KISA official. "These attacks are likely to continue".
International cybersecurity experts have agreed, with Crowdstrike CEO George Kurtz, in December CNBC, that North Korea was launching such attacks to accumulate the crypt on the one hand and on the other to find additional funding for their attempts. to destabilize South Korea through the digital war.
"I certainly think that highlights the capabilities that North Korea has in cyber […] It is something that many companies should be worried about, especially those dealing with Bitcoin and cryptocurrencies ".
For most cybersecurity companies that have investigated hacks, one of them The main motivations of North Korea are the need for additional revenue, since the communist regime was undergoing the weight of international sanctions, and since Bitcoin was approaching $ 19,000 by the end of 2017. McAfee Christiaan Beek tells Cointelegraph:
"In my opinion, the attacks are purely focused as an alternative source of income and are in line with attacks on financial institutions already underway since 2014. With the increase in the value of cryptocurrency in 2017, we have noticed that they are no longer financial institutions were interesting [in North Korea] but also services related to cryptocurrency ".
Extraction and phishing Turkey
This statement is supported by more recent developments, which show that North Korea is no longer daring South Korea's trade and objectives. This March, McAfee published a report that blocked an attack on the financial sector of Turkey – in which Turkish banks and financial institutions were on the receiving end of phishing emails – on cybercriminals working for the North Korean government, though it was not clear if they could steal the money.
In August, the Korea Development Bank (KDB) stated in a report that North Korea had tried to extract Bitcoin on a "reduced scale" between May and July 2017, although once again the fact that this attempt was apparently limited to three months last year would indicate that it was not particularly profitable. However, in September, reports came from Washington-based financial intelligence experts (through the Asia Times) North Korea uses "cryptocurrency" more and more to avoid international sanctions. In particular, the report stated that it was obtaining encryption by illicit means (ie hacking), and then selling this crypt using different accounts, exchanges and cryptocurrencies, in order to convert their illicit gains into fiat without anyone being in able to trace them directly to the original source.
Regarding the question of whether the international community can be sure that the North Korean government is the main source of the violations attributed to it, Beek says that the best evidence available certainly points to it as guilty:
"When we consider attribution, it's all about the context: from a technical review, we tend to look at the technical indicators, but they could also contain false flags, something you always have to keep in mind team, let's look at the modus operandi, the so-called TTPs [tactics, techniques and procedures] and add to this the technical analysis of the malware / tools used and the geopolitical context. In addition to this, it is important to ask the question, who would benefit from this attack, where it fits into the geopolitical scene, would be a typical cyber crime operation or we are looking at a different scenario, etc. "
Fred Plan is in agreement, informing Cointelegraph that the attackers are linked to the North Korean government in various ways:
"These groups, like TEMP.Hermit [i.e., ‘Lazarus’]to consistently target organizations in a way that is only in line with North Korea's state interests: spear-phishing against South Korea and the defense of the United States and government agencies, for example. These activities have shifted as the geopolitical situation changes, so the last major shift towards financially motivated targeting continues to increase sanctions and financial restrictions against the North Korean government. We believe that this has made the regime increasingly desperate for funds, and this is reflected in cybernetic operations against banks and cryptocurrencies. "
And given that there are only 1,024 IP addresses in North Korea, it is clear that the state is really the only actor able to conduct such a malevolent campaign. "The same groups described above have been linked to the use of North Korean internet infrastructure," explains Plan.
"As North Korea maintains extremely strict controls on communications and Internet access in the country, it is highly unlikely that anyone can use it [North Korea’s] infrastructure without the government knowing about it. It is more likely that the regime explicitly gives permission or even commands the use of it (as in the case of military IT units). This means that the aggressive operations connected to North Korea are actually all sponsored by the state ".
This assessment is further strengthened by most of the reports published so far on North Korean hacking, which usually identify the group of hackers Lazarus / TEMP.Hermit as responsible for the attacks. In addition to this, other research has found that some Monero mining malware send their coin loot to North Korean universities, which are run by the state.
North and South
The different experiences of crypts in North and South Korea are perhaps the crudest indication of how, to thrive, cryptocurrencies need an educational and supportive environment. Cryptocurrencies depend on people who already have certain personal freedoms, such as those that derive from sufficient levels of material wealth and development, and from the juridically consecrated capacity to act independently – at least in certain prescribed areas – by dominant institutions such as the state and financial system.
In nations where these freedoms are greatly reduced, it is highly unlikely that any cryptocurrency will take root between the general population, even at a low level. This is exactly what has emerged in North Korea, while the experience in South Korea is largely opposed, as it already has the level of infrastructure development and political freedom necessary for its population to adopt Bitcoin and other criptovalute.
And as the activities of the North Korean government illustrate, this analysis is freely applicable internationally: if a nation has the means to use cryptography, and if it is in a position of independence from the global community (ie, the type that comes from Being a "thief" or a relatively marginalized state that does not comply with the laws of international diplomacy), then it could very well turn to cryptocurrencies, as has also been seen with Venezuela, Russia, Turkey and Iran.
That said, North Korea is a particularly extreme case of a nation that turns to the crypt, something that comes from the extreme nature of its situation. It can not issue its own cryptocurrency supported by the state after the model of the Venezuelan Petro, since its population would not have the means to use it, so instead it returned to the illicit use of crypto. And it is likely that it will continue with such use until it remains in a violent economic and political state, and as long as there are unregulated exchanges willing to accept its badly obtained currencies.