South Korea Considers Sanction Revisions Against North Korea Following US Crypto Funding Claims

South Korea is contemplating changes to its sanctions policy regarding North Korea after the United States connected Pyongyang’s cryptocurrency theft operations to the financing of its weapons programs.

Key Takeaways:

South Korea may review its sanctions stance following the US's connection of North Korea’s crypto theft operations to weapons financing.
The US Treasury has imposed sanctions on eight North Korean individuals and two entities, including KMCTC and Ryujong Credit Bank, for laundering stolen cryptocurrency.
North Korea’s cyber operations serve as a significant source of illicit funding for its weapon development initiatives.

During an interview with Yonhap News TV on Thursday, South Korea’s Second Vice Foreign Minister Kim Ji-na indicated that Seoul could “reassess sanctions if deemed necessary,” highlighting the importance of strong coordination with the US to address North Korea's escalating cyber threats.

Kim emphasized, “It is crucial to cooperate with the US in response to cryptocurrency theft by Pyongyang as it can finance North Korea’s nuclear and missile programs, which threaten our digital ecosystem.”

South Korea May Revisit Sanctions on North Korea After US Links Crypto Theft to Weapons Funding

US Sanctions Target North Korean Crypto Laundering Operations

Following these remarks, the US Treasury Department announced new sanctions against eight North Koreans and two entities accused of laundering stolen cryptocurrency. Notably, the Korea Mangyongdae Computer Technology Company (KMCTC) and Ryujong Credit Bank are suspected of directing illicit digital funds toward weapon development activities.

The Treasury has identified key figures in this laundering operation, including KMCTC president U Yong Su, along with Jang Kuk Chol and Ho Jong Son, who are considered essential to the associated ransomware and fraud schemes.

These measures are aimed at DPRK operatives believed to be operating in China and Russia, allegedly running front companies and accounts to repatriate earnings from North Korean IT workers abroad.

According to Ryan Yoon, a senior analyst at Tiger Research, this initiative is part of an ongoing series of sanctions that began following North Korea’s 2016 nuclear test.

“Sanctions have continued in smaller measures since then,” Yoon said, noting that while further sanctions are probable, their economic impact may remain limited. “This situation has persisted for decades,” he added.

This renewed focus highlights South Korea's determination to align with Washington in combating North Korea's cyber tactics, which continue to present a robust source of illicit funding for its weaponry pursuits.

North Korea's Connection to Major Cryptocurrency Hacks

North Korea has been implicated in numerous large-scale crypto hacks, including attacks on Bybit, the Ronin Bridge, Harmony, and various decentralized finance (DeFi) platforms.

In response, global law enforcement is taking action. The US Department of Justice has recently initiated moves to seize over $7.7 million in digital assets linked to North Korean IT professionals involved in blockchain companies.

Additionally, in 2023, the US and South Korea entered into a bilateral agreement to bolster their technical capabilities in detecting and countering DPRK cyber operations.

North Korea’s cyber strategies are continually evolving. In April, operatives linked to Lazarus reportedly established US-based shell companies to distribute malware targeting crypto developers. Furthermore, Kraken successfully thwarted an infiltration attempt by an individual believed to be a North Korean posing as a job candidate.