Cryptocurrencies & Sanctions
Bitcoin has seen its value skyrocket in the past few weeks, and some cyber analysts are beginning to worry that the digital cryptocurrency is primed for exploitation by countries looking to dodge sanctions.
Bitcoin is but one of many cryptocurrencies backed by encrypted blockchain technology that allows users to conceal their identities when buying or selling the currency. This offers a level of anonymity that has been perceived as hitherto limited to cash transactions. Consequently, cryptocurrencies may offer a means for criminals and sanctioned entities to conduct business beyond the global financial system.
Furthermore, the anonymity available in bitcoin transactions makes it challenging for international authorities to prove that money has been transferred by sanctioned entities.
Nonetheless, we have seen stories crop up surrounding North Korea’s use of the currency to dodge UN sanctions. According to FireEye, North Korean state-backed hackers have been increasing attacks on cryptocurrency exchanges in South Korea to steal Bitcoin and other cryptocurrencies. It’s expected that North Korea’s hold of the digital currency will continue to increase in the wake of tightening sanctions.
Keeping in mind that FireEye’s article was originally published in September, it was stated that they observed North Korean actors target at least three South Korean cryptocurrency exchanges since May 2017. When taken into consideration in combination with the ties between North Korean operators and a compromised Bitcoin news site in 2016, as well as the use of a cryptocurrency miner, we begin to see the potential interest that the nation has in Bitcoin, among other cryptocurrencies.
Furthermore, Bloomberg recently published a report suggesting that Russia may utilize cryptocurrencies to work around increasing sanctions.
However, there are still quite a few obstacles in the way of using Bitcoin for large-scale transfers, as cashing out of the system is complicated. Regulators keep a close watch on the transfer of virtual currencies into cash, and anything that operates in dollars would be subject to US regulation.
Moreso, there’s simply the issue that there is a limited quantity of the cryptocurrency available. The total market capitalization of Bitcoin seems to be around $280 billion, which, while it is a lot of money, is but a drop in the bucket of true global wealth.
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