Crypto hits the mother of all economic crises threatens North Korea

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North Korea’s hacker army has made at least $840 million by stealing crypto-assets from exchanges around the world, reports blockchain research firm Chainalysis.

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As the world faces the mother of all economic crises, cryptocurrency boosters have their own realization: it means you too.

It’s quite ironic that a financial universe created to replace the real one is dragged down by the dynamics of the old economy that it planned to ignore.

Bitcoin and other such oddities have fallen on their own, of course, as crypto exchanges descend into scandal and farce. Now, as economist Nouriel Roubini warns of the aforementioned crisis, crypto enthusiasts are also scrambling to hedge as stocks take a nosedive for more conventional reasons.

Yet, that brings us to another irony: perhaps the crypto superfan with the most to lose is North Korean Kim Jong-un.

The most opaque nuclear power used to stay afloat by counterfeiting $100 bills, hacking pharmaceuticals and blackmailing neighbors for cash, oil and food via missile launches and nuclear threats.

Not so much now that hacking crypto exchanges is becoming not only Pyongyang’s main industry, but a growing industry. In the first five months of 2022 alone, Kim’s army of hackers made at least $840 million by stealing crypto-assets from exchanges around the world, reports blockchain research firm Chainalysis. That’s over $200 million more than the Kims hackers would have plundered in all of 2021.

Chances are it’s more than that. One thing we have learned over the past few years is that, the opacity of the crypto scene being what it is, the full extent of these hacking episodes is truly on display.

Kim, of course, has a huge headache on his hands as the value of the assets on which he bases his economic future and the very legitimacy of his family dynasty disappear. Why bother stealing coins, non-fungible tokens, what have you, if the loot loses value and is harder to offload to others?

All of this means that an increasingly cash-poor Kim in 2023 is likely to be more desperate. And at a time when the global economy stumbles into a year as uncertain as the Group of Seven countries have ever seen.

Kim Jong-un has a huge headache on his hands as the value of his crypto assets both decreases and becomes harder to sell.

KOREA SUMMIT PRESS POOL/AFP via Getty Images

Is President Xi Jinping’s China exit zero Covid disaster for real or just happy talk? Investors can only hope. Could the Federal Reserve slow its tightening moves? It is someone who guesses.

Will the Japanese yen dip to 150 to the dollar or climb back towards 100? Where are the inflation and debt problems going in Europe? Vladimir Putin Could Russia slow down its war in Ukraine or expand it? Could Xi and US President Joe Biden come up with bigger trade policy moves? What could OPEC do about production levels over the next 12 months?

Roubini of New York University fears the worst. Dr Doom, as he calls it, believes the global economy is heading for an unprecedented confluence of economic, financial and debt crises, following the explosion of deficits, borrowing and debt over the of the last decades.

Not the least of these is the mother of all stagflationary debt crises, as high prices collide with slowing growth. This outcome, Roubini concludes, can be postponed, not avoided.

To this infuriating list of imponderables, global markets must add further provocations from nuclear-armed North Korea as it returns to geopolitical blackmail. Neither Biden nor Japanese Prime Minister Fumio Kishidas’ party has had to worry much about the Kims in the past two years.

One big reason: Donald Trump has given Kim more political gifts than North Korean authorities ever thought possible: summits, invaluable photo opportunities and praiseworthy public affection from the former American leader. This allowed Kim to accelerate the development of his nuclear program under Trump’s watch.

Pyongyang also had less reason to shake the development aid cut when the crypto hacking game was so spectacularly lucrative.

Not anymore. The recent collapse of FTX.com appears to vindicate Roubin’s longstanding disdain for cryptocurrencies. Late last month, Roubini argued that Crypto was a corrupt game where the house always and consistently leads the retail suckers who take the big losses.

This latest scandal is sure to hamper the ability of North Korean hackers to help the Kim family pay their bills, says Troy Stangarone, senior director of the Korea Economic Institute of America.

In an op-ed for online magazine The Diplomat, he writes that FTX’s collapse will complicate North Korea’s hacking program as other exchanges tighten security and regulators rush with new monitoring parameters . As crypto values ​​decline, stealing digital coins and tokens also becomes less profitable.

All of these changes will likely take time, and vulnerabilities in open source software may be a permanent feature of the industry, but the scale of FTX’s collapse will likely bring about the kinds of corporate and regulatory changes that will make crypto less useful. for North Korea, says Stangarone. For a regime that has become so reliant on crypto to evade sanctions and steal hard currency, the collapse of FTX couldn’t be more timely.

So do the epic tantrums that are sure to erupt from Pyongyang as Kim realizes his hacking syndicate is bankrupt. The return of rocket man Kim, as Trump called him, is the last thing Asian markets need in the coming year.

Nouriel Roubini believes the global economy is heading for an unprecedented confluence of economic, financial and debt crises, following the explosion of deficits, borrowing and debt over the past decades.

Tom Williams/CQ roll call

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