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South seeks to track and freeze North’s crypto assets

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President Yoon Suk Yeol speaks at a Cabinet meeting at the presidential office on Aug. 29. [YONHAP]
President Yoon Suk Yeol speaks at a Cabinet meeting at the presidential office on Aug. 29. [YONHAP]

The South Korean government plans to submit a bill to track and freeze North Korean cryptocurrency and virtual assets used to fund Pyongyang’s illicit weapons programs, multiple government sources said Sunday.

An earlier version of the bill was first announced by the National Intelligence Service (NIS) in November but was sent back for further revision on the orders of President Yoon Suk Yeol, who wanted it to contain “practical measures to bolster national security,” according to administration insiders who spoke to the JoongAng Ilbo on condition of anonymity.

The revised bill is the result of 10 months of consultations between different South Korean government ministries to add teeth to the South’s existing sanctions against the North.

In his comments to the JoongAng Ilbo, one high-ranking government official who declined to be named said that the new bill reflects the president’s belief that “the country’s cyber security framework urgently needs repair” after the previous Moon Jae-in administration “allowed it to fall into ruin in order to avoid offending North Korea.”

An administration insider with in-depth knowledge of the bill said the latest version contains measures to “track and neutralize virtual coins and other cryptocurrency assets stolen by the North through hacking,” which were not included in the original bill proposed by the NIS last year.

South Korean intelligence reported that the North stole 1.7 trillion won ($1.28 billion) worth of Bitcoin and Ethereum through various hacking outfits in 2022 alone.

Rep. Yoon Han-hong of the conservative People Power Party (PPP), who sits on the legislature’s National Policy Committee, said during the National Assembly’s audit of the government last year that virtual assets worth a total of $52.46 million from the crypto wallets of North Korean hacking groups had likely been laundered after entering South Korean cryptocurrency exchanges over the past four years.

North Korean hackers have stolen over $3 billion over the past five years, according to a recent report by blockchain analysis company Chainalysis.

The growth in Pyongyang’s haul from cyber crime has corresponded with a sharp rise in missile tests by the regime, which launched over 90 cruise and ballistic missiles last year and conducted its first successful test of a solid-fuel intercontinental ballistic missile in April.

About half of North Korea’s missile program has been funded by cyberattacks and cryptocurrency theft, according to Anne Neuberger, the U.S. deputy national security adviser for cyber and emerging technology, in May.

Experts who report to the United Nations Security Council committee for sanctions against North Korea have also previously accused Pyongyang of using cyberattacks to fund its nuclear and missile programs.

In addition to its new cyber security bill, the Yoon administration also plans to create a national cyber security committee under the direct control of the president to enforce measures to strengthen the country’s online defenses against foreign hacking attempts.

The new committee will be headed by the chief of the National Security Office and include the NIS director as a member.

The committee will have the power “to ban the manufacture, import and sale of the products that interfere with cyber security,” according to a PPP official with knowledge of the government’s plans who spoke to the JoongAng Ilbo.

The NIS conducted a fact-finding mission in April to figure out whether government ministries and public institutions were unintentionally using information technology products subject to sanctions at home and abroad.

The NIS probe paid particular attention to products by Chinese and Russian companies, such as Huawei, according to the PPP official.

BY HYUN IL-HOON,MICHAEL LEE [lee.junhyuk@joongang.co.kr]