The consequences of the disastrous collapse of FTX for North Korea were mentioned by Troy Stangarone, senior director at the Korea Economic Institute of America (KEI). Stangarone noted in one of his blogs for The Diplomat that the demise of FTX made it harder for North Korea to take advantage of the flaws that still existed in the cryptocurrency ecosystem.
Stangarone claimed that because of its “zero-covid policy,” North Korea’s economy was heavily reliant on the proceeds from cryptocurrency hacks.
He also referred to a Chainalysis report that claimed that North Korea stole about $300 million in 2020 and $400 million in 2021. Additionally, it was calculated that N. Korea had taken cryptocurrency worth about $1 billion.
Cryptocurrency lacks proper regulation, says North Korea’s Troy Stangarone
Stangarone emphasized the fact that, despite the fact that cryptocurrencies are not brand-new, a lack of appropriate regulations makes them an attractive target for hackers. Additionally, the ability to hide the source of money by using mixers has attracted hackers to cryptocurrencies.
Stangarone claims that DeFi has specifically helped N. Korea to hack and launder money. According to him, DeFi platforms make it simpler to convert money into cash without the need for any know-your-customer protocols.
According to information from Stangarone, North Korea uses money that has been stolen and laundered to finance its illegal activities. The U.N. Panel of Experts states that stolen cryptocurrency proceeds “remain an important revenue source” for North Korea.
On the other hand, the collapse of FTX has prompted and alerted international regulators. It will be challenging for North Korea to carry out the hacks if more stringent controls are put in place.
Even if crypto companies do not improve their internal systems, the failure of FTX has increased regulatory scrutiny, says Stangarone. New regulations will necessitate stronger internal controls than were seen at FTX and are probably present at the majority of crypto firms, regardless of whether they are developed specifically for the crypto industry or existing regulations are expanded upon.
Additionally, bringing cryptocurrency closer to the traditional financial system and its regulatory framework, would close some of the gaps that North Korea has used to launder money.