The Bittrex exchange denied allegations for allowing two accounts originating from North Korea to trade on its markets. Following a document revealing failures to screen users issued by the financial authorities of the state of New York, the exchange issued explanations on its screening tactics. Bittrex announced that the accounts were actually mistakenly identified and belonged to South Korean users.
The explanation arrives a few days after the New York Department of Financial Services denied BitLicense to the market operator, citing severe flaws in its KYC process. The concerns about North Korean accounts are related to the discoveries that hackers originating from the country have managed to steal or stealth-mine significant amounts of digital assets, and may be trying to liquidate them.
In the past, Bittrex has been accused of inadvertently exposing user passports in unencrypted emails, in a non-automated KYC process. Other exchanges have also shown troubles with screenings, with reports of stolen data or attempted identity theft. A fully verified account can liquidate much larger orders of digital assets, and multiple markets have been used to liquidate stolen funds from exchange hacks.
North Korea remains an extremely active force in relation to digital assets. Recent reports suggest the Hermit Kingdom may, in fact, be attempting to get funding through cryptocurrency to continue its nuclear weapons program. A recent paper by the Royal United Services Institute (RUSI) suggests that recent exchange hacks may be the deed of North Korean attackers, and the large-scale funds liquidation may be related to the country’s attempt at building weapons of mass destruction.
Some cryptocurrencies are capable of bypassing international capital controls. Liquidating the funds is more difficult, but some exchanges still allow for large-scale sales that do not raise suspicions.
North Korea is currently holding its second cryptocurrency conference, attempting to show that the country is genuinely interested in the technology, beyond its reputation for using hacker groups and spreading mining malware.