The regulatory indecision on cryptocurrency regulations in the United States is mostly owed to the sentiment that the virtual assets industry includes a lot of baggage with it. This includes large scale scams and hacks that have resulted in losses in the billions.
According to a recent paper by Lawfare, the author describes how cryptocurrency laundering was a massive national security risk to the US. This discussion arose after the US Department of Justice indicted two Chinese nationals for funneling money into North Korea.
Allegations of North Korea using covert spies to attack the United States have always been in the making. With the advent of blockchain technology and cryptocurrencies, the US has made it a point to watch out for incessant cyber-attacks. The two Chinese citizens stole some of the $250 million stashes from the DPRK-affiliated Lazarus Group.
The United States Treasury Office Office of Foreign Assets Control [OFEC] sanctioned the two men of being associated with the Lazarus Group. An official statement read:
“OFAC is designating, Tian Yinyin), and Li Jiadong), for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a malicious cyber-enabled activity.”
Reliable sources said that Yinyin and Jiadong converted a majority of the stolen assets to fiat currency at Chinese banks. Treasury Secretary Steve Mnuchin claimed that the North Korean regime has continued its widespread campaign of extensive cyberattacks on financial institutions to steal funds. The US has said that it will continue its efforts to bring down any bad actors affiliated to North Korea.
In the latest case, the convicted men were being designated for having materially assisted the Lazarus group both financially and technologically. The Lawfare article mentioned the US Treasury Department’s strong stance against North Korea and the steps it would take to activate countermeasures. It was also noticed that the Chinese nations had a three-step plan to funnel money: hack the exchange launder the virtual assets and then convert it to fiat.
According to reports, the cash out step was also very intricate. Tian and Li ran an illicit crypto trading operation, where they converted stolen crypto into fiat and then transferred it to customers for a fee. The former CIA analyst pointed out that the scheme would probably have been a child’s play for North Korea.
Hackers associated with the Lazarus group usually use open-source digital wallets that are freely available online. These wallets can also be downloaded in the highly restricted DPRK, something which the Lazarus Group has fully utilized. The US DOJ fuelled the argument against North Korea by discussing where the funds were going.
According to some reports, DPRK was using the stolen cryptocurrencies to fund its own nuclear projects. Multiple outlets recently broke the news that the country had fired a ballistic into the sea, but no detailed analysis has been revealed yet. The author of the Lawframe article reiterated that the US needs to sort out its cryptocurrency regulations before other countries take advantage of the chinks in the armor.
This was not the first time that the US has come under attack from foreign parties as it was also hit by a Russian Group in 2016. The group of hackers was indicted for stealing Bitcoin and using it to malign Hillary Clinton’s election campaign. Details of the hack only came out in 2018 by which time Trump had already been elected the 45th President of the United States.