How North Korea is Dominating Crypto and DeFi Activities

ZachXBT, a well-known investigator in the cryptocurrency sector, has made startling revelations regarding the significant role North Korea plays in the digital currency landscape. His findings suggest that numerous decentralized finance (DeFi) platforms attribute nearly all their trading volume to the Democratic People's Republic of Korea (DPRK).

While investigating the recent Bybit hack, ZachXBT unearthed a vast network showcasing North Korean activity. He expressed concern that the cryptocurrency sector is ill-equipped to address these challenges, potentially inviting stricter regulations against the industry.

Alarming Levels of North Korean Money Laundering via Crypto

In his inquiry, ZachXBT traced the notorious Lazarus Group, linked to North Korea, as responsible for the Bybit hacking incident. Despite their success in laundering the stolen funds, he continues to seek means to freeze those assets, emphasizing an “eye-opening” network of illicit North Korean operations within the DeFi arena.

“Some decentralized protocols recently reported that nearly 100% of their monthly trading volume and fees are sourced from the DPRK. Centralized exchanges are often even worse, as they take hours to respond to illicit fund flows, when laundering could be done in minutes,” ZachXBT highlighted via Telegram.

ZachXBT has frequently delved into the activities of North Korean hackers and has criticized various platforms, including Circle, for their delayed actions in combating money laundering.

The Bybit hack, tagged as one of the largest heists in crypto history, has spotlighted the extent of the issue. Platforms like THORChain and OKX faced backlash for facilitating the laundering of funds by the Lazarus Group during this incident.

Data from Arkham Intelligence corroborates ZachXBT’s suspicions regarding the notable presence of North Korean cryptocurrency networks. They indicate that North Korea now ranks as the third-largest national holder of cryptocurrency, following the US and the UK.

While on-chain analysis can track North Korea's crypto assets, the exact utilization of these assets remains largely speculative.

Recent geopolitical developments show North Korea strengthening ties with Russia, a nation advocating for the use of crypto to sidestep sanctions. Speculations abound regarding what North Korea might be purchasing with its illicitly obtained crypto.

ZachXBT expresses worry that North Korea has exposed critical flaws in the crypto domain. He argues that Know Your Transaction (KYT) practices are fundamentally flawed and easily bypassed, while Know Your Customer (KYC) requirements merely serve as traps for ordinary users, often failing to prevent breaches.

Clearly, North Korea's infiltration into the world of cryptocurrencies is deep-rooted. Given its infamous reputation, it is plausible that the profits generated from crypto activities contribute directly to funding its military operations.

“This industry has significant vulnerabilities when it comes to hacks and exploits. Unfortunately, I doubt the sector will rectify these issues independently unless legislation is imposed that negatively impacts the entire cryptocurrency framework,” ZachXBT remarked.

For the benefit of the crypto community, it is crucial to implement long-term solutions to address these challenges, reducing the likelihood of restrictive regulations and intrusive government oversight.