North Korea Becoming Cryptocurrency-Hacking Central As Cyber Crimes Increase

  • Cryptocurrency Analysis
  • Editors Pick

This article was written exclusively for Investing.com

  • Hacking a considerable crypto risk; remember Mount Gox?
  • Security and custody go hand-in-hand
  • North Korea, Russia, China, and Iran are allied and lead the world in hacking
  • Crypto crime is a profitable business
  • Economic war should increase risks over the coming months and years

Hacking, which involves gaining unauthorized access to data in a computer system or individual unit, is used to exploit weaknesses in computer systems or networks, either to harm organizations or governments or to steal online assets.

In 2021, a hack impacted the Colonial Pipeline system in Houston, Texas. The system carries gasoline and jet fuel primarily to the Southeastern US. The ransomware cyberattacks caused a shutdown of the computerized equipment that manages the pipeline. Colonial had to pay the hackers, affiliated with a Russia-linked cybercrime group, DarkSide, a $4.4 million ransom.

Another cyberattack that year affected JBS SA (OTC: JBSAY ), a Brazil-based meat processing company, disabling its beef and pork slaughterhouses. The attack impacted the US, Canadian, and Australian facilities, causing JBS to pay an $11 million ransom.

Though neither crime, above, had any impact on the cryptocurrency asset class, security and custody remain significant issues for cryptocurrencies, which because they're both created and exist online make them susceptible to cyberattacks by hackers looking to steal valuable tokens.

Hacking a considerable crypto risk; remember Mount Gox?

In 2010, Bitcoin was trading at five cents per token; by the end of that year, the price had risen to 29 cents. A year later, on Dec. 31, 2011, the first and leading cryptocurrency rose to $4.19 and kept accelerating. By the end of 2012, it was trading at $13.44 per token and rising fast, so much, so that at the end of 2013, the price had closed at $764.27.

During the same period, Mount Gox, a Tokyo-based cryptocurrency exchange, handled more than 70% of Bitcoin transactions at their peak. During those early days, for cryptocurrencies, Mt. Gox's prominence made it a prime target for computer hackers, causing more than a few security problems for the exchange.

In 2011, hackers used stolen credentials to transfer Bitcoins, resulting in the theft of several thousand of the tokens. However, at $4.19 per token in 2011, the losses were tolerable and below the $100,000 level.

But in February 2014, Mt. Gox suffered a fatal attack when hackers stole 650,000 to 850,000 Bitcoins, causing insolvency for the exchange and the collapse of the business.

As cryptos move into the mainstream, security and custody of the assets remain the critical elements for continued success. And Mt. Gox continues to be the cautionary tale that in order to succeed securing the platforms holding customer cryptocurrency positions and individual wallets is a necessity, providing market participants with a system that guards against the growing number of hackers looking to pick pockets in cyberspace.

North Korea, Russia, China, and Iran are allied and lead the world in hacking

As of 2019, the top-ten countries leading the world in hacking were:

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Source: cyberkite.com.au

China, Russia, and Iran were in the top five, but, at the time, North Korea was a budding hacking country looking to burst into the top ten rankings.

On Apr. 19, 2022, an article on Cryptoslate.com, highlighted North Korea’s growing prominence as a location where cybercriminals targeting the cryptocurrency space operate.

According to the piece, Arthur Cheong, founder of DeFiance Capital, a crypto-focused venture fund, believes state-sponsored North Korean hackers are actively looking to compromise top crypto organizations. Cheong, tweeted about this in mid-April:

He specifically mentioned BlueNorOff as one of those North Korean hacking groups which recently social engineered attacks via mapping the relationship graph of the entire crypto space.

Social engineering allows the group to send out phishing emails with a high probability of slipping through security walls at most crypto organizations.

Crypto crime is a profitable business

North Korea appears to be having increasing success with its hacking sponsorship. The US recently linked hackers sponsored by the Asian state to a massive cryptocurrency heist of $615 million from players of the popular online game Axie Infinity in March.

A United Nations panel monitoring sanctions on North Korea has accused Pyongyang of using stolen funds and crypto hacking to support its nuclear and ballistic missile programs, avoiding international sanctions. In 2020, a US military report outlined how the North Korean hacking activities dated back to the mid-1990s and had grown to 6,000 hackers operating from Belarus, China, India, Malaysia, and Russia.

Chainalysis, a US-based cybersecurity and Blockchain analysis company, said North Korean hackers stole around $400 million of digital assets in 2021 in seven attacks.

Economic war should increase risks over the coming months and years

On Feb. 4, 2022, Chinese President Xi and Russian President Putin shook hands on a “no-limits” agreement between their two countries. Given what happened immediately afterward it has likely changed the world. On Feb. 24, Russian soldiers invaded Ukraine, and China has been transparent about its plans to force reunification with Taiwan.

The China-Russia agreement bifurcates the geopolitical landscape with the US-Europe and its Western allies. North Korea and Iran are critical Chinese and Russian allies. This bifurcation has killed any prospects of globalism and economic cooperation, particularly in the wake of the harsh and getting harsher sanctions imposed on Russia because of its attack on Ukraine. However, it's increased the incentives for some rogue statues to find ways to circumvent the sanctions already imposed on them and elevated the need for many governments to come up with new ways of protecting themselves and their citizens.

Thus, state-sponsored hacking is likely to rise. While Russia, China, North Korea, and Iran have been quietly supporting hackers, the shift in the geopolitical landscape is likely to increase cyber support as a tool in the economic war.

At this point, North Korea has become hacking central. Its hackers have collected over $1 billion in illegal gains during 2021 and 2022.

Cryptocurrency and other financial platforms as well as those holding cyberwallets filled with valuable cryptocurrencies must bolster their security to avoid losing their assets to an expanding number of hackers.

The hackers have remained one step ahead of security innovations, creating considerable risks in the cryptocurrency asset class. Skilled computer geeks have become the old-fashioned pickpockets, pedestrians, and commuters once worried about. Now, it's becoming everyone's concern.

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