While some Western central bankers pay lip service to the possible benefits of government-created cryptocurrencies, it seems that only autocratic regimes have signed on to cryptocurrency so far. From Venezuela to Iran to China, it’s only the most repressive regimes around the world and those that want to really clamp down on private cryptocurrency markets that have thus far jumped into the fray. Joining the current group of entrants soon will be North Korea.
North Korea is widely believed to be behind several prominent hacks of worldwide cryptocurrency exchanges. As the country is still under severe sanctions, it has to rely on any means necessary in order to fund its continued existence, not to mention the lavish lifestyle enjoyed by its leader, Kim Jong Un.
In the past the country has allegedly resorted to counterfeiting US $100 bills to fund itself. But in a world that is increasingly digital, North Korea has had to adapt, and boy has it ever. By some accounts North Korea has been able to steal about $2 billion by hacking cryptocurrency exchanges, targeting banks, and engaging in online phishing expeditions.
Its new cryptocurrency will be an attempt to get around the sanctions placed on it, and it may very well be an asset-backed cryptocurrency like Venezuela’s petro. But given how few assets the country actually has, and how difficult it would be for anyone outside North Korea to gain access to those assets, it’s hard to say whether that asset backing would be worth anything.
It’s almost guaranteed that anyone holding or using the new North Korean cryptocurrency would subject themselves to sanctions as well, so it’s unclear how useful the cryptocurrency might be. Its use would almost certainly be limited to trade with China, or inside the various special economic zones North Korea has set up to attract foreign trade and investment.
Whether the new cryptocurrency will result in fewer North Korean cyberattacks is also a matter of speculation. But no matter whether the new cryptocurrency launches or not, we can guarantee that Bitcoin is a better investment.