North Korea’s Bitcoin Crash Course Has Experts Worried

The Hermit Kingdom's elite university students are learning about bitcoin, raising concerns that cryptocurrencies could be used to avoid sanctions.

|
Nov 27 2017, 7:30am

North Korean students at Pyongyang University of Science and Technology sit in rows during a seminar and lecture on Oct. 5, 2011. Photo by David Guttenfelder/Associated Press

This article originally appeared on VICE News.

For the last year, there have been rumblings about North Korea and bitcoin. The Hermit Kingdom has been accused of stealing the cryptocurrency, hoarding it, and even mining it.

Now, students at a Pyongyang university, once accused of training the state’s hackers, have been given a crash course in cryptocurrencies — something that’s never happened before.

It’s the first hard evidence of North Korea’s growing interest in cryptocurrencies and bitcoin, in particular. While the course could be a normal opportunity given the current appeal of bitcoin, some experts suggest it’s evidence of a more sinister fascination, related to hacking, theft, and even the avoidance of sanctions.

“There should be no mistaking this course as a benevolent academic exchange; everything in North Korea is carefully evaluated and managed by the regime,” Priscilla Moriuchi, director of strategic threat development at security intelligence firm Recorded Future, told VICE News.

Earlier in November, Federico Tenga, the Italian founder of bitcoin startup, Chainside, traveled to Pyongyang to teach more than three dozen of the country’s elite students about bitcoin and the blockchain technology that underpins it.

Tenga initially contacted the Pyongyang University of Science and Technology, the only foreign-funded school in North Korea, proposing a talk about bitcoin at a finance conference organized there. But after President Donald Trump banned U.S. citizens from traveling to North Korea, the university cancelled the conference.

Instead, the school contacted Tenga and invited him to teach the course.

“For sure, it is a weird country,” Tenga said. ”It is almost like going to another planet.”

Tenga spent a week at the the Pyongyang university, during which he gave five 90-minutes lectures to a class of 40 students between the ages of 20 and 25, as well as an extra seminar to faculty members.

Most people Tenga met spoke excellent English, he told VICE News. And while the students were well aware of what was happening in the world outside North Korea and they’d heard about bitcoin, they didn’t know how mining and trading worked. Despite their lack of knowledge, Tenga said the students caught on fast.

Tenga said he was only allowed to visit places outside the university with an official from the government — but while inside the school’s walls, he was on his own.

“Inside the campus, there was no monitoring at all. I was free to move alone and nobody was controlling me — not even during the lectures,” he said. “There was no DPRK official looking at what I was teaching.”

In July, a report from Recorded Future, a security intelligence company backed by the CIA and Google, claimed that bitcoin mining was taking place in North Korea based on monitoring internet traffic coming out of the country.

Despite that report and other claims regarding North Korea’s bitcoin activity, Tenga is skeptical the Hermit Kingdom is mining its own bitcoin — a process which requires a lot of sophisticated and specialized computers. Clearly, North Koreans are interested in the technology, Tenga said, so someone could have been simply running tests but not fully mining the cryptocurrency.

“I was running a full bitcoin node while I was there, so maybe people monitoring North Korean internet think that somebody was mining that way, but I wasn’t,” Tenga said. A bitcoin node is a computer which contains a full copy of the entire bitcoin blockchain and helps verify all the transactions taking place on the network.

Tenga was given internet access while at the university which let him access the sites like Twitter and Google, although he’s almost certain his online activity was being monitored.

But not everyone is convinced about the innocuous nature of North Korea’s interest in learning about bitcoin.

“[The university] was allowed to offer this course, bring in a foreign expert, and educate North Korean students because the government and senior leaders realized the value of bitcoin and cryptocurrency as a generator of funds for the regime and allowed it,” Recorded Future’s Moriuchi said.

Pyongyang University of Science and Technology didn’t respond to a request for comment from VICE News about the purpose of the course, but a spokesman told NK News: “Our teaching is intended to assist the DPRK by building capacity that enables effective development and benefits the people of the DPRK.”

Addressing concerns about the illegal use of bitcoin, the spokesman added: “We are acutely aware of sanctions issues and the risks of misuse or misappropriation of resources and know-how and take care to avoid any sensitive or proscribed areas.”

Earlier this year, US cybersecurity company FireEye accused Pyongyang of attacking at least three South Korean cryptocurrency exchanges and using the anonymous nature of bitcoin as a way for the country to avoid the sweeping financial sanctions imposed by the US and others in the wake of its ongoing missile and nuclear tests.

The latest raft of financial sanctions imposed by the UN Security Council cut the country’s textile exports by 90 percent, severely restricting Pyongyang’s ability to get hard currency. Banks in China, which have been slow to stop supporting the regime, have also stopped taking money from North Korea, further isolating the country. The anonymous nature of bitcoin, however, makes it easier to circumvent the traditional banking system.

“We definitely see sanctions being a big lever driving this sort of activity,” Luke McNamara, a researcher at FireEye, told Bloomberg. “[North Korea] probably sees it as a very low-cost solution to bring in hard cash.”

In fact, North Koreans could more easily understand the concept of bitcoin, since they’re not used to a traditional banking system, according to Tenga. “They don’t have this concept of modern central banking that sometimes makes it harder for people to understand bitcoin because they are used to other financial systems,” he said.

While North Korea does have a central bank, most citizens avoid using it and deal almost exclusively in paper cash due to fears that the government will rip them off.

Pyongyang University of Science and Technology — which was founded by Kim Chin Kyung, an American-Korean evangelical Christian — has been accused of training North Korea’s army of state hackers, although school has strongly denied the charge, citing a lack of evidence.

But critics maintain trainees attended the university and enrolled in “advanced science and technology” courses, which would have taught them the skills necessary to become a hacker, like those used in the Sony hack in 2014 and the more recent WannaCry ransomware attack.

More VICE
VICE Channels