Large-Scale Cryptocurrency Laundering: the U.S. Faces Threat to National Security from Crypto-related Cyberattacks


On March 27, 2020, a cybersecurity feature by Law Fare addressed the threat of large-scale cryptocurrency laundering schemes that could pose a risk to National Security.

This is after the most recent indictment by the U.S. Department of Justice of two Chinese Nationals, Tian Yinyin and Li Jiadong, who was alleged to have laundered stolen virtual currency linked to North Korea’s hacker group.

In April 2018, the notorious Lazarus Group, believed to be acting with the support of North Korea’s regime, stole $250 Million through a cyberattack from an unnamed cryptocurrency exchange. The two Chinese nationals then converted most of the money into fiat currency via Chinese Banks.

The U.S. Treasury Office of Foreign Assets Control (OFEC) sanctioned the two programmers on account of being linked directly to the Lazarus Group:

“OFAC is designating, Tian Yinyin), and Li Jiadong), for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a malicious cyber-enabled activity.”

U.S. Adversaries Are Bound To Exploit Cryptocurrencies and the Power of Blockchain Technology

The Democratic People’s Republic of North Korea (DPRK) is alleged to facilitate cyber-attacks into financial institutions with a vested interest in stealing cryptocurrencies.

So far, successful financial hacks linked to the Lazarus Group have earned them hundreds of millions in U.S. dollars, that many financial authorities believe the heavily-sanctioned country is using to finance its illegal nuclear programs.

A detailed account by the U.S. Department of Justice during the indictment shows just how coordinated, lucrative, and how much of a risk such activities pose to National Security.

If U.S. adversaries, especially rogue states like DPRK, explore the power of blockchain technology for illegal cryptocurrency activities, it could increase their power and ability to evade U.S. and U.N. sanctions.

The other two major adversaries, Russia and Iran, have also made moves. The U.S. Justice Department indicted the Russian Military Intelligence for interfering in the 2016 U.S. elections by laundering cryptocurrency to conduct the famous information warfare.

Additionally, Iran is alleged to be planning cryptocurrency-funded [u1] information warfare against the U.S. in the ongoing crisis, since the bombing of Iranian General, Qasim Soleimani.

The US Will Need to Play Catch up Then Stay Ahead in Blockchain Technology and Crypto-Regulations

The crypto-space is still heavily unregulated, despite the SEC’s efforts, and as the technology is still young, more innovation is bound to grow, so is the legal, regulatory and criminal activity.

The two major challenges in cryptocurrency are the existence of anonymity in crypto-wallets access and elusive exchanges that practice lux or no verification process.

The intergovernmental Financial Action Task Force is currently setting global Anti-money Laundering (AML) measures for crypto, but even then, the U.S. will have to do more to seal the regulatory loopholes existing between Nations.

Apart from regulation and indictment, the U.S. needs to train analysts dedicated to understanding blockchain technology and keeping up with recent innovations.

While the nature of crypto allows for instant and direct transactions with no third-party validators or facilitators, users still need to keep their funds safe, and developers need to accelerate mass adoption.

One of the key factors that will help cryptocurrencies to gain mainstream adoption is proper or sufficient regulation, an entry point that National Security Officials could use to their advantage.

Wayne Jones
Wayne is a Blockchain enthusiast and expert in crypto trading. Currently, I cover trendy issues on digital currencies.

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