Your daily briefing of some of the most important stories from the crypto, finance, and tech space.
Liz Warren Fudges Figures For North Korean Nuclear Crypto Cash
Liz Warren doesn't want to regulate crypto. She wants to kill it off.
Terminally bad-at-math senator Elizabeth Warren recently claimed that—among other things—crypto was being used to finance around half of North Korea's illicit nuclear weapons program.
In an interview with CNBC's Squawk Box, Warren claimed that crypto is a "serious problem" for the US. "A part of the financial system is being used by terrorists, by drug traffickers, by rogue nations, in order to launder money, to move money through the system to finance their illegal activities."
The comments come after Warren attended a meeting with the CEOs of major banks. The question arose about whether crypto should be subject to the same rules to address illegal activity that other financial organizations are. The answer from all of the CEOs was, of course, yes. However, Warren wants to go further than almost anyone else in addressing the "threat" she sees.
"There's a new threat out there," Warren warned. "It's crypto. And it is being used for terrorist financing. It is being used for drug trafficking. North Korea is using it to pay for about half of its nuclear weapons program. We can't allow that to continue."
Warren was recently corrected on her claim that crypto is being used to fund terrorism, which derives from a Wall Street Journal article stating that Hamas and Palestine Islamic Jihad had received $130 million in crypto since 2021. Blockchain analytics firms Elliptic and Chainalysis suggested that this figure had been exaggerated by as much as 99%.
What About North Korea?
Warren gives no source for her claim that crypto is directly funding North Korea's nuclear weapons program. Very likely this simply conflates different statistics to paint a picture that conveniently fits her anti-crypto narrative.
North Korea's Lazarus Group is believed to have stolen $3 billion in crypto over the past three years, including $1.7 billion in 2022 alone. This is more than enough to have funded the country's entire nuclear weapons program since inception, according to a South Korean think tank.
North Korea has poured up to $1.6 billion (about 231.2 billion yen) into its nuclear development program over the last 50 years, an estimate by a South Korean think tank showed.
However, crypto hacks are just one of Lazarus Group's revenue streams. They have also attacked mainstream banks, hacked major government and commercial institutions (including Sony Pictures), and distributed malware, including the Wannacry ransomware worm.
It's unclear how much money Lazarus Group has stolen and extorted from its different activities, and it's practically impossible to tell how much of that total (likely many billions) is being diverted to North Korea's nuclear program.
Perhaps more to the point, it's also an odd argument to make, given that Lazarus Group stole the crypto used to fund the regime's various activities. Holders aren't willingly using their crypto to fund North Korean nuclear missiles, as they might intentionally be using it to trade drugs and evade tax.
In this respect, AML/KYC rules—in fact, any regulations—are not going to make a difference. Lazarus stole that crypto because they were able to exploit vulnerabilities in centralized platforms and decentralized protocols. Tracking the identities of the victims who ultimately "provided" those funds is not going to help. While addressing some of the leaks in the system, such as Binance's historic oversights, might help a little, it doesn't get around the fact that crypto is decentralized, censorship-resistant cash and direct intervention to block transactions at the blockchain level is practically impossible to enforce.
The only thing that would work is shutting down the means by which Lazarus Group are moving money, i.e., banning blockchain and taking it offline (at least, for US users) entirely.
And that, of course, is what Warren really hopes to achieve.
Subscribe to our newsletter and follow us on X/Twitter.