ICYMI: At Hearing, Commander of Indo-Pacific Command Agrees with Senator Warren on Dangers of North Korea’s Use of Cryptocurrency to U.S. National Security
Experts Estimate Cryptocurrency Funds Half of North Korea’s Illegal Weapons Program
Washington, D.C. - United States Senator Elizabeth Warren (D-Mass.), Chair of the Senate Armed Services Subcommittee on Personnel, highlighted the dangers of cryptocurrency to U.S. national security during her exchange with Admiral Samuel Paparo, Nominee to be the Commander of Indo-Pacific Command (INDOPACOM).
During their exchange, Admiral Paparo agreed with Senator Warren that North Korea’s reliance on cryptocurrency to evade sanctions and fund its illegal nuclear and missile programs is a threat to the U.S. and the security of our allies in the Indo-Pacific. “Cryptocurrency inherently, with its opaqueness, is a key enabler worldwide for proliferation, for terror, for illicit trafficking, including illicit trafficking in drugs,” Admiral Paparo said. “(Crypto) directly aids illicit trafficking, terror, crime, human trafficking and proliferation of weapons and makes the world less secure.”
Admiral Paparo also pointed out how crypto could be attractive to countries like North Korea and illicit arms dealers as they can make “money outside of the eyes of the law and it provides a moral hazard whereby people can do bad things without fear of punishment because it’s opaque.”
Transcript: To Consider the Nomination of: Admiral Samuel J. Pararo, Jr. USN for Reappointment to the Grade of Admiral and to be Commander, United States Indo-Pacific Command
U.S. Senate Armed Services Committee
Thursday, February 1, 2024
Senator Warren: Thank you, Mr. Chairman and congratulations Admiral Paparo on your Nomination.
So, if confirmed, you will oversee one of the most dangerous national security threats: North Korea. Reports indicate that North Korea has shifted to a more aggressive posture against American troops and allies in the region, and in just the last few months, the country has fired off hundreds of missiles as it has increased its military capabilities.
North Korea is one of the most heavily sanctioned countries in the world, so one question is where the heck are they getting the money to test these new weapons? You know, this is not free. One answer is cryptocurrency.
North Korea uses cryptocurrency both to evade sanctions and raise revenues. From cyber hacks against banks, to strikes on crypto exchanges, to ransomware attacks against American businesses and hospitals, North Korea has been using crypto to generate revenue.
Over the past five years, it has stolen at least $3.3 billion dollars worth of crypto. And those dollars matter--experts estimate that half its missile program is paid for through crypto crime.
So, Admiral Paparo, is North Korea’s reliance on cryptocurrency to evade sanctions and fund its illegal nuclear and missile programs a threat to our national security and the security of our allies in the Indo-Pacific?
Admiral Samuel Paparo, Nominee to be the Commander of Indo-Pacific Command (INDOPACOM): Yes, Senator, most certainly.
Senator Warren: Alrighty. You’re not the only one to recognize this threat – your predecessors have been ringing the alarm for years.
Former INDOPACOM Commander Admiral Davidson, who was appointed by President Trump, warned this committee in 2021 that North Korea’s crypto crime allows it to quote “raise illicit revenue to support its weapons development programs.”
To underscore the sheer scale of North Korea’s reliance on crypto, consider that nearly a third of all crypto stolen last year was stolen by North Korea and that its hacks are on average 10 times more lucrative than those linked to other actors. You know, no one needs crypto more than Kim Jong Un.
North Korea’s success in evading sanctions and funding its weapons program with crypto also undermines our security elsewhere. North Korea is selling missiles and ammunition to Russia, helping Russia evade sanctions so that it can continue its war against Ukraine.
So let me ask you, Admiral Paparo, would cutting off North Korea’s access to crypto and making it harder for other countries to evade sanctions strengthen our global security?
Admiral Paparo: Yes, Senator, directly.
Senator Warren: Would you like to say more about that?
Admiral Paparo: Cryptocurrency inherently, with its opaqueness, is a key enabler worldwide for proliferation, for terror, for illicit trafficking, including illicit trafficking in drugs. While blockchain methodologies have promise for assurance of financial transactions, this particular use of it, usage of crypto, which is backed by nothing but emotion, directly aids illicit trafficking, terror, crime, human trafficking and proliferation of weapons and makes the world less secure.
Senator Warren: Oh, well, that is pretty definitive, Admiral. Can I just ask you what is it that you think makes crypto so attractive to countries like North Korea and illicit arms dealers?
Admiral Paparo: People can make money outside of the eyes of the law and it provides a moral hazard whereby people can do bad things without fear of punishment because it’s opaque.
Senator Warren: Alright, so you hit it right on the head– “outside the eyes of the law.”
In November, Treasury asked Congress to give it more tools to crack down on crypto crime and money laundering. Twenty senators, Democrats and Republicans, have put together a bill that delivers exactly what Treasury called for. You know, it’s not about who should regulate crypto to protect investors – it’s about dealing with the most urgent crypto problem in front of us: ensuring that countries like North Korea and terrorists, drug traffickers, and other criminals can’t use crypto to undermine America’s security.
I’m looking forward to working with my colleagues, and looking forward to working with you, Admiral. Thank you.
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