By Deborah Haynes, foreign affairs editor
North Korea is increasingly using cryptocurrency to bypass international sanctions and could use it to help fund programmes to build weapons of mass destruction, a report says today.
This form of money, such as Bitcoin, probably only plays a peripheral role in Pyongyang's fundraising and sanctions-evasion efforts at present, the Royal United Services Institute (RUSI) paper said.
"However, the sophistication of North Korea's broader cyber crime operations and its general demand for ongoing financial resources present the risk that its cryptocurrency activity could become a sustained security challenge," it said.
The scale and scope of North Korean cryptocurrency activity has grown since 2017.
"The prospect of North Korea engaging in large-scale sanctions circumvention using cryptocurrencies as a means of payment for prohibited service such as luxury goods or facilitating prohibited transfers is a risk that could grow as well," the report added.
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Pyongyang's holdings of cryptocurrencies could be between $545m (£416m) and $735m (£561m), depending on valuation, it said.
The report noted such estimates come with caveats as it is not clear how much of the money has been converted into a traditional currency such as dollars.
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Actual holdings of cryptocurrencies could be as little as $15m (£11m), the report, by experts David Carlisle and Kayla Izenman, said.
North Korea has been linked to cryptojacking and can use the dark web as well as pay intermediaries directly in cryptocurrency, they said.
The report said South East Asia, with a growing cryptocurrency sector, is particularly vulnerable to North Korea's cyber activities.
"North Korean networks have engaged in fundraising and have evaded trade and financial restrictions through the use of front companies, agents and deceptive financial techniques at banks across the region," it said.
The UN, the US, the EU and others have imposed extensive sanctions on North Korea to curb its nuclear weapons ambitions.
They include prohibitions on the provision of financial services and restrictions on the trade of raw minerals such as coal.
"To circumvent these restrictions, North Korea has employed numerous techniques to raise and move funds, and to access prohibited goods and services," the report said.
"These sanction evasion methods allow North Korea to finance its weapons of mass destruction (WMD) programmes directly, and to raise funds for its ongoing operations, such as procuring luxury goods and other prohibited items, or paying salaries to overseas affiliates and middlemen. These methods are sophisticated and wide-ranging."
The report called for urgent action so that countries in South East Asia "can succeed in making themselves less vulnerable to the risks of North Korean cryptocurrency activity".
The publication comes after North Korean leader Kim Jong Un said a breakdown in talks with the United States has raised the risks of reviving tensions.
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