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Crypto in the Hermit Kingdom: Understanding the Objectives of the Pyongyang Blockchain and Cryptocurrency Conference

The coronavirus outbreak may have averted or postponed North Korea’s aim of hosting a curious gathering of blockchain and cryptocurrency experts. Potential participants should resist the temptation to attend this event, should Pyongyang seek to reinstate it in the future.

The Pyongyang Blockchain and Cryptocurrency Conference, an event which led last year to the controversial arrest and indictment of Ethereum developer Virgil Griffith for sanctions violations, was scheduled to take place again between 22–29 February. While the conference was always liable to postponement amid COVID-19 panic and UN warnings about sanctions against attendees, there has been no public status update from North Korea. After the charges against Griffith were made public, media reports emphasised the conference as an event aimed at improving North Korea’s understanding of cryptocurrency and blockchain technology in order to evade sanctions. Yet Pyongyang is perfectly capable of this already, so what are they really gaining from this event?

The Event’s Real Purpose

The conference’s website (which was removed after the UN reports but can be accessed through web archives) specifically notes that US citizens are encouraged to attend via flights to Beijing and then onwards to Pyongyang, and that participants will receive a separate ‘paper visa’ to avoid having their passports stamped. Yet there is little information available on the content of the 2019 conference, an opaqueness which is reinforced in the 2020 website with indications that journalists are not allowed to attend. The largest source about the alleged content of this event comes from the US Department of Justice’s complaint about Griffith, which claims that the American programmer ‘provided North Korea with valuable information on blockchain and cryptocurrency technologies, and participated in discussions regarding using cryptocurrency technologies to evade sanctions and launder money’. According to the US charge, this ‘valuable information’ included content on smart contracts, proof-of-work vs. proof-of-stake, and mining – concepts that, while relatively technical, are understood by most in the crypto industry and are easily explained by open-source materials online.

Therefore, it seems obvious that North Korea does not need Griffith’s presentation in order to comprehend this technology. North Korean hackers are understood to possess incredibly sophisticated technological prowess, including but not limited to hacks of traditional financial institutions, cryptocurrency exchanges, and huge Western corporations, not to mention their ransomware campaigns. There have been reports of North Korea mining cryptocurrency (‘mining’ refers to the process of using huge amounts of computer power to create/validate transactions on the blockchain and release new coins into the system, comparable to traditional gold mining) as early as 2018, with the US-based cybersecurity firm Recorded Future recently reporting that this activity has only increased with time.

But North Korea may actually be deriving a greater benefit from this conference, other than supposed access to valuable knowledge: the country is getting international attention and a selection of around 100 relatively well-known tech entrepreneurs and developers who, whether directly or indirectly, lend legitimacy to the regime through their attendance in Pyongyang.

The content of the conference seems to support this theory. Two days of the programme are reserved for the conference itself, with other days including a Pyongyang tour, a visit to the border with South Korea, and a two-day trip to Masikryong Ski Resort. It seems, perhaps, as if the conference is not only a showcase for crypto and blockchain, but also for the state itself.

The conference is reportedly hosted by the Committee for Cultural Relations with Foreign Countries, which is cited as a government department on the conference website, represented by ‘special delegate’ Alejandro Cao de Benós. Cao de Benós, a Spanish national, is the president of the Korean Friendship Association, an organisation whose stated objectives are to ‘show the reality of the DPR Korea to the world and […] work for the peaceful unification of the Korean peninsula’. The 2019 conference was organised with the help of Chris Emms, of Coinstreet Partners, who has recently denied any involvement with the 2020 Conference. Emms reportedly created a Telegram group last year to encourage blockchain community members to attend the conference.

Misconceived Analogies

It is worth considering why these blockchain and cryptocurrency industry members would even be interested in a conference held in a heavily sanctioned country. The explanation lies in the convictions of many (but not all) in the crypto industry: that governments should not be able to control every aspect of daily life and certainly not personal finances. This belief is what created a decentralised, peer-to-peer, currency system in the first place, and while the system has become increasingly centralised for ease of use, many in the industry still hold to these principles.

Sanctions evasion could be seen as a way of subverting national governments which are stifling financial transactions. Griffith, for example, referred to his trip to Pyongyang as a ‘vacation’ and, according to the US Justice Department complaint, attempted to send crypto between North and South Korea, with full knowledge that this would be in violation of international sanctions.

Despite the crypto industry’s often critical attitude towards sanctions in general, it is important to remember that these UN sanctions are there for a reason. This conference supports the North Korean political and military elites, aiming to consolidate wealth that may in turn finance their nuclear programme.

In fact, it seems comical to even think about such a technological and global event in the context of the restrictive North Korean state, where all television and radio receivers only tune in to official state channels and internet usage is heavily restricted for all but the elite. Laura Shin, host of Unchained Podcast, perhaps put it the best on Twitter: ‘Let’s say Virgil could have educated everyday North Koreans on cryptocurrency. He would likely have to start such a presentation by explaining what the internet is’.

This is not to say that crypto cannot actually help North Korean citizens – the Pyongyang Blockchain and Cryptocurrency Conference just isn’t the way to do it. Yaya Fanusie, adjunct Senior Fellow at the Center for a New American Security, recently wrote about the possibility of humanitarian aid organisations partnering with cryptocurrency exchanges to support North Korean citizens and keep their transactions transparent and public. He notes that this might not be the most exciting application of the technology, but rather exists as a practical-use case where crypto could genuinely assist everyday North Koreans, rather than the regime.

It is obvious why North Korea would want to put on an event to show off their country. And it’s obvious why they would want Americans there to tweet about it. What is not obvious is why the crypto industry cannot see through this attempt to co-opt the bastion of decentralisation for this damaging purpose.

Crypto and blockchain technology, despite their vast and beneficial possible applications, already have an incredibly negative reputation for involvement in illicit activity. It is ultimately incredibly damaging to this reputation to see anyone in the community perpetuate these ideas by promoting the conference.

Kayla Izenman is a Research Analyst at RUSI’s Centre for Financial Crime and Security Studies.

Katherine Norton-Williams is a Research Assistant at RUSI's Centre for Financial Crime and Security Studies.

The views expressed in this Commentary are the authors', and do not represent those of RUSI or any other institution.

 

Channel website: https://rusi.org

Original article link: https://rusi.org/commentary/crypto-hermit-kingdom-understanding-objectives-pyongyang-blockchain-and-cryptocurrency

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