North Korea’s dictator Kim Jong-un is known for his infectious laugh. Now he is laughing all the way to the bank after the regime’s elite hackers pulled off one of the biggest digital heists in history last week. A staggering $6.3 billion vanished in an instant when they broke into Binance, the world’s largest cryptocurrency exchange.
Binance operates as a digital financial marketplace where users can buy, sell, exchange and invest in various cryptocurrencies. Last year, the same hackers made off with $1.5 billion after breaking into Bybit, another cryptocurrency exchange. There is considerable evidence to suggest that North Korea has raked in almost $10 billion from such activities over the past decade.
While ordinary North Koreans struggle daily to survive, Kim’s cybercriminals are working flat out to secure foreign currency for the regime’s ambitious nuclear programme. Many have wondered how such an isolated and impoverished country can maintain an army of 1.2 million soldiers and threaten peace in Asia. The answer is quite simply that North Korea under Kim Jong-un operates less like a conventional country than a global crime syndicate.
Normal states keep their economies running by taxing their citizens, selling goods abroad and developing their domestic businesses. But not North Korea. Instead, the regime has devoted enormous resources to building up its own top-secret department, known as Room 39, whose sole purpose is to obtain hard currency through illegal means.
Years ago, the regime specialised in producing counterfeit hundred-dollar bills—the famous “superdollars”—smuggling counterfeit medicines and drugs, and trafficking in endangered species. Now that the world has gone digital, data theft and hacking have taken over.
North Korean hacking groups, with names such as Lazarus Group and TraderTraitor, are no mere collections of computer geeks sitting in basements playing with their PCs. They are directed by military intelligence. The country’s most gifted mathematics pupils and computer talents are identified as early as primary school and trained to become ruthless cyberwarriors.
The $6.3 billion cryptocurrency heist is therefore no lucky one-off, but the result of hard work and cold calculation. Western experts believe that cyberattacks now account for almost half the country’s foreign currency earnings.
The hackers launder the stolen assets through cryptocurrency mixers, decentralised exchanges and intermediaries scattered across Asia. The proceeds are then converted into cash and equipment that go straight to the country’s weapons factories. As an added source of income, the regime has an unknown number of IT engineers working for Asian and Western companies under false identities, with their salaries funnelled into the regime’s coffers in Pyongyang.
To understand how extraordinary these priorities are, we need to turn back the clock. When the Korean War ended in 1953, both North and South were equally devastated and impoverished. Over the following decades, the two neighbours took radically different paths. While South Korea developed a free and open economy, North Korea placed its faith in the state and collective farms.
Today, the facts speak for themselves. While South Korea has a GDP of $1.85 trillion, researchers estimate the total size of North Korea’s economy at between $16 billion and $35 billion. South Korea’s economy, in other words, is 50 to 60 times larger than North Korea’s. But are the North Koreans catching up with their far wealthier neighbour? The answer is no. Even when South Korea’s annual growth is just 1.5 to 2 per cent, its GDP increases by $30–40 billion. This means that every year or two, South Korea adds the equivalent of North Korea’s entire economy to its own.
Yet North Korea still manages to frighten the world out of its wits with its sabre-rattling, thanks to the ruthless doctrine known as Songun—military first. The regime rides roughshod over its own people and spends between 20 and 30 per cent of the country’s economic output on guns and ammunition. No other country does the same. Since ordinary workers in North Korea receive almost no pay and society operates at a bare subsistence level, Kim Jong-un and his associates can channel all the more into the armed forces.
But the regime also depends on China and Russia for its survival. China accounts for 90 per cent of the country’s limited legal foreign trade. With no oil of its own, North Korea needs supplies from its giant neighbour. Agriculture in the North also struggles with poor soil, fertiliser shortages and broken-down machinery. Chinese food aid has therefore saved people from starvation and death on several occasions.
On top of all this, Western experts believe that a substantial number of North Korean cryptocurrency hackers operate from China. Between ten and fifteen hacking groups are said to have been identified. All answer to North Korea’s feared Reconnaissance General Bureau (RGB). Chinese banks and front companies also help the North Koreans convert their stolen cryptocurrency into conventional money.
Cooperation with Russia brings in hard cash, too. Since the war in Ukraine began, North Korea has sent trainload after trainload of artillery ammunition and rockets, as well as thousands of its own soldiers, to the Russian front. In return, Kim Jong-un has received much-needed cash, oil, grain and—what worries the West most—cutting-edge Russian expertise in space technology, satellites and missile guidance systems.
Over the years, Western countries have secured UN backing for a wide range of sanctions against the regime in Pyongyang. In practice, however, China and Russia turn a blind eye to the many violations and, in numerous cases, actively help the North Koreans evade sanctions. Both regard North Korea as an important buffer state in Asia’s geopolitical contest. For China and Russia, the overriding priority is to prevent Western interests, represented by South Korea and the United States, from gaining a foothold close to their borders. A troublesome North Korea armed with nuclear weapons is evidently far preferable to a country seeking dialogue and cooperation with the South.
According to analytics firms, North Korean hackers account for almost 90 per cent of all cryptocurrency stolen worldwide. Further attacks are expected. Meanwhile, Binance, Bybit and other exchanges are working flat out to plug gaps in their security systems. Experts say the companies must develop sophisticated, multilayered defences—a costly and time-consuming undertaking. They must also build up reserve funds to ensure that users can recover their money if disaster strikes.
In a time of bad news, we must also reckon with the fact that relations between North and South Korea are worse than they have been for years. The regime in the North has effectively severed all communication with the government in Seoul, and the country’s revised constitution defines South Korea as a principal enemy. That is a recipe for yet more missiles.
