Crypto hit “Mother of All Economic Crises” threatens North Korea
As the globe confronts the “mother of all financial crises,” cryptocurrency boosters have a stark realization of their own: this means you, too.
It is quite ironic that a financial universe created to replace the real one is being dragged down by old economic dynamics it planned to ignore.
Bitcoin and other such curiosities have fallen by themselves, of course, as crypto exchanges descend into scandal and farce. Now, as economist Nouriel Roubini warns of the aforementioned crisis, crypto enthusiasts are also scrambling for cover as values plummet for more conventional reasons.
Yet this turns into another irony: the crypto superfan who has the most to lose may be North Korea’s Kim Jong-un.
The most opaque nuclear power used to stay afloat, counterfeiting $100 bills, pirating pharmaceuticals and extorting neighbors for cash, oil and food via missile launches and nuclear threats.
Not so much now that hacking crypto exchanges is becoming not only Pyongyang’s top industry, but a growing one. In the first five months of 2022 alone, Kim’s hacker army collected at least $840 million by stealing crypto assets from exchanges around the world, blockchain research firm Chainalysis reports. That’s $200 million plus more than Kim’s hackers are believed to have looted in all of 2021.
Odds are it’s a lot more than that. One thing we’ve learned over the past few years is that, where the crypto scene is opaque, the full extent of these hacking episodes is truly revealed.
Kim, of course, has a huge headache on his hands as the value of the assets on which he bases his financial future—and the very legitimacy of the family dynasty—disappears. Why bother stealing coins, non-fungible tokens, what have you, if the exchange is both decreasing in value and harder to unload for others?
All this means that an increasingly cash-strapped Kim in 2023 is likely to become a more desperate one. And at a moment when the global economy stumbles into as uncertain a year as the Group of Seven nations have ever experienced.
Is China’s exit from President Xi Jinping’s ‘zero Covid’ disaster for real or just happy talk? Investors can only hope. Can the Federal Reserve throttle back on tightening moves? It’s anyone’s guess.
Will the Japanese Yen fall to $150 or rise to $100? Where Europe’s inflation and debt problems? Can Vladimir Putin’s Russia throttle back on the Ukraine war or expand it? Can Xi and US President Joe Biden come to a major trade policy battle? What can OPEC do about production levels over the next 12 months?
Roubini at New York University fears the worst. “Dr. Doom, as he is known, believes that the world economy is “lurching towards an unprecedented confluence of economic, financial and debt crises, following the explosion of deficits, borrowing and leverage in recent decades.”
Not the least of which is the “mother of all stagflationary debt crises” as high prices collide with slowing growth. This outcome, Roubini concludes, “can be delayed, not avoided.”
To this insane list of uncertainties, global markets must add renewed provocations from nuclear-armed North Korea as it returns to its geopolitical blackmail business. Neither Biden nor Japanese Prime Minister Fumio Kishida’s party has had to worry much about the Kims in the past two years.
One big reason: Donald Trump gave Kim more political gifts than North Korean officials ever thought possible: summits, priceless photo opportunities, and a ferocious amount of public affection from the former US leader. It gave Kim cover to speed up the development of his nuclear program on Trump’s watch.
Pyongyang also had less reason to shake the development aid cup while the crypto-hacking game was so spectacularly lucrative.
Not any more. The recent collapse of FTX.com seems to vindicate Roubini’s long-standing disdain for cryptocurrencies. Just late last month, Roubini claimed that “Crypto is corrupt gambling where the house always and systematically goes ahead of retail” who bear the big losses.
This latest scandal is sure to hamper North Korea’s hackers’ ability to help the Kim family pay the bills, argues Troy Stangarone, senior director at the Korea Economic Institute of America.
In an op-ed for the online magazine The Diplomat, he writes that the collapse of FTX will complicate North Korea’s hacking program as other exchanges tighten security and regulators throw in new supervisory parameters. As crypto values fall, it also becomes less profitable to steal digital coins and tokens.
“All of these changes will likely take time, and the vulnerabilities in open source software may be a permanent feature of the industry, but the scale of the FTX collapse will likely result in the kinds of corporate and regulatory changes that will make crypto less useful to North Korea , says Stangarone.”For a regime that has become equally dependent on crypto to avoid sanctions and steal hard currency, FTX’s collapse could not be more poorly timed.”
Ditto the epic tantrums sure to come out of Pyongyang when Kim realizes his hacking syndicate is out of business. The return of “Rocket Man” Kim, as Trump called him, is the last thing Asian markets need in the coming year.