A blockchain expert is accused of helping North Korea’s leaders. But what would they want from him?
Virgil Griffith must have known there was a chance that his decision to attend a cryptocurrency conference in North Korea was going to land him in trouble. Now he’s experiencing firsthand the heavy force of US sanctions against the country: he faces up to 20 years in prison.
According to a criminal complaint unsealed last week by the US Department of Justice, Griffith, who works for the nonprofit Ethereum Foundation, traveled to North Korea without permission from the State Department, a requirement of US law. The Federal Bureau of Investigation alleges that Griffith subsequently conspired to provide “services” to the Democratic People’s Republic of Korea (DPRK) in a way that violates US sanctions.
His defenders, including Ethereum creator Vitalik Buterin, say Griffith gave a harmless presentation about open-source technology, based on information that was already publicly available. But now it will be up to a court to determine whether what Griffith was doing with the North Koreans should land him in jail for two decades. In the meantime, it’s also worth asking: What were the North Koreans doing with Griffith?
Griffith attended the Pyongyang Blockchain and Cryptocurrency Conference along with approximately 100 others, according to the criminal complaint. It alleges Griffith told FBI investigators that the DPRK government approved his presentation topics in advance, and a conference organizer told him to “stress the potential money laundering and sanction evasion applications of cryptocurrency and blockchain technology.”
According to the FBI, Griffith and other attendees did indeed discuss these topics, as well as “how DPRK could use these technologies to achieve independence from the global banking system.” Then, after the event, Griffith allegedly tried to help set up an exchange of cryptocurrency between North Korea and South Korea, a transaction that would have violated US sanctions.
Sanctions are diplomatic (as opposed to military) tools of coercion that governments can use against foreign adversaries. The North Korean government faces expansive restrictions on trade under sanctions from the US and many other nations intent on curtailing its nuclear weapons program. (Unfortunately for Griffith, executive actions by both the Obama and Trump administrations have made the US-imposed restrictions very broad in recent years as the conflict over the weapons program has escalated. US persons aren’t allowed to provide “any goods, services, or technology to North Korea.”)
Cut off from the global financial system, the North Korean regime under Kim Jong-un is looking for ways to grow its economy that don’t depend on that system. That’s why it finds cryptocurrency technology, and financial technology more broadly, so compelling, says John Park, director of the Korea Project at Harvard’s Kennedy School's Belfer Center.
Even if economic sanctions against North Korea were dropped, its economy is so “chronically underdeveloped” that standing up a viable national currency and building up its international trade would be extremely difficult, says Park. North Korea’s leaders are enthusiastic about cryptocurrency’s potential as a tool to help the regime achieve these goals more quickly, without having to rely on traditional middlemen like the International Monetary Fund and the World Bank, says Park.
In August a United Nations report revealed that the regime had stolen as much as $2 billion via cyberattacks on financial institutions, including cryptocurrency exchanges, and was using the money to fund its weapons program. That report said North Korean officials were also “mining” cryptocurrency and using it to fund the military.
This sort of behavior has contributed to a sense of urgency that the US already feels toward North Korea as it continues to expand its nuclear weapons program, says Park.
So what were the North Koreans doing with Virgil Griffith? We can’t really know. In September, the cryptocurrency-focused news site Decrypt published details provided by an anonymous attendee of the Pyongyang conference. The person said the other attendees were government officials, employees at the state-owned bank, and economics professors. The North Koreans “wanted to know how to use Bitcoin as a replacement for SWIFT,” the global bank-to-bank payment system, said the anonymous attendee, adding that they were also interested in using Ethereum smart contracts to automatically enforce agreements outside of their own borders. (Meanwhile, another attendee, Fabio Pietrosanti, recently told CoinDesk that sanctions were not discussed at the conference.)
The alleged cryptocurrency-exchange hacks and mining activity suggest the North Koreans already have their own understanding and even homegrown talent. But if the regime is really going to use cryptocurrency as a tool of economic development, it has a lot of work to do, says Park: “Gathering information about how to do that is under the heading of initial steps.”
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