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Inside North Korea’s silent infiltration of the crypto industry


Welcome back,

This week, we have a lot on Korea—both Koreas, in fact. There’s insight into how North Korea infiltrated the crypto industry, while in South Korea, we explore the impact of deepfakes on women—a cautionary tale for the rest of the world—and how a crypto giant may follow in Coinbase’s footsteps and go public.

In case you missed it, we also had a story on the takeover of on-demand service Robinhood in Thailand, which is giving Grab even more competition in the region’s fiercest market.

Be sure to share with friends and subscribe—there’s plenty more original content coming to Asia Tech Review, and you won’t want to miss out!

We’ll see you later this week—have a great Monday,

Jon

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I’ve written before about why North Korea is so interested in crypto—plenty of money and weak security—but a new report from CoinDesk sheds light on the trend and provides concrete numbers.

The article pins a number of cryptocurrency startup hacks on North Korean developers who had deceptively joined companies using false names and IDs. In various cases there were red flags, but the attacks were not sophisticated and instead involved social engineering or inside access.

In one case, one founder who Coindesk had been talking to for comment was actually hacked during the reporting of the story, giving them a live example and a clear reminder as to how rife the threat is.

CoinDesk identified more than two dozen companies that employed possible DPRK IT workers by analyzing blockchain payment records to OFAC-sanctioned entities. Twelve companies presented with the records confirmed to CoinDesk that they had previously discovered suspected DPRK IT workers on their payrolls.

Some declined to comment further for fear of legal repercussions, but others agreed to share their stories with the hope that others could learn from their experiences.

In many cases, DPRK employees proved easier to identify after they’d been hired.

Interestingly, a number of firms admitted to hiring employees who were subsequently found to be North Korean but they didn’t last long, either due to red flags being raised or sub-quality work.

The idea that North Korea is some kind of expert at crypto hacking is largely debunked. The takeaway from the article is that a number of North Koreans are knowledgeable of the industry but they rely on its unique factors, like a globally-spread workforce and accepted levels of anonymity, to gain positions that can be abused.

Peak XV, the fund formerly known as Sequoia India and Southeast Asia, is reducing the size of the fund it closed in 2022. It raised $2.85B in commitments from its limited partners (LPs), but now it is releasing $465M in obligations, according to Manish Singh at TechCrunch who got access to a letter sent to LPs.

That’s not quite all:

The venture group, which remains the largest in the region, isn’t just scaling back its growth and multi-stage funds, but it’s also trimming how much it charges its backers, lowering its management fees to 2% and the percentage of carried interest it collects on profits to 20%, down from 2.5% and 30% respectively.

The figures move back in Sequoia’s favour if/when it achieves a 3X or more for LPs, but essentially it has made terms more favourable for its investors. That begs the question why?

Manish writes that the change is in line with “a perceived dearth of venture-scale opportunities” in India, as well as rising valuations. News emerged last month that the firm has cashed $1.2B from exits over the last year since it split from Sequoia. Combined with this reduction in fund and more favourable terms for LPs, that would suggest Sequoia sees this as a frothy time that’s more a seller’s market than a buyer’s market, for VCs.

There’s still some $2B in dry powder for Peak XV so it will still be active, albeit perhaps more cautiously than before. The fund had been fairly selective in its deals, with a penchant for bigger cheques at the later stage—we shall see how that changes as it continues to operate independently and with this more prudent outlook.

Will other investors in India and Southeast Asia follow suit?

We wrote in September about issues around deepfake pornography in South Korea, where illicit images were circulating among groups on Telegram and other social spaces. The AP has a deeper look at the situation and how it is impacting the way that women in the country use social media.

Police say they’ve detained 387 people over alleged deepfake crimes this year, more than 80% of them teenagers. Separately, the Education Ministry says about 800 students have informed authorities about intimate deepfake content involving them this year.

That’s just those who have come forward.

Experts believe the situation has developed due to a few connected factors:

The prevalence of deepfake porn in South Korea reflects various factors including heavy use of smartphones; an absence of comprehensive sex and human rights education in schools and inadequate social media regulations for minors as well as a “misogynic culture” and social norms that “sexually objectify women,” according to Hong Nam-hee, a research professor at the Institute for Urban Humanities at the University of Seoul.

Overall, there’s concern that not enough has been done to combat deepfake images. The stories from Korea are bad enough, but what is particularly troubling is that this could happen in plenty of other countries as AI products become more sophisticated and easier to access.

Listing a crypto business is a big deal. Trading on the NASDAQ is one element that makes Coinbase the world’s most trusted crypto exchange, although it has also cost the company by forcing it to adopt a more conservative and cautious approach.

Bithumb, Korea’s largest exchange based on trading volume, is looking to follow in Coinbase’s steps according to a report that claims it is eying a NASDAQ listing.

The firm is said to be looking to go public in the second half of next year. Initially, a local listing in Korea was said to be favoured but new reports suggested that Bithumb is reviewing an opportunity to float in the US via NASDAQ. The Coinbase halo may play a part here, but there’s also some necessity since Korea’s regulators do not recognise cryptocurrency exchanges as legitimate businesses at this moment.

Bithumb and Upbit compete closely in Korea, according to data from Coingecko

That’s despite the crypto industry, and particularly trading, being comparatively mainstream in Korea compared to other markets. Last month, we published a story looking at how the country’s Web3 industry is rising from the ashes of the Terra-Luna collapse two years ago. 

If and when Bithumb does list, its financials will be a fascinating look.

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Believe it or not, North Koreans are reportedly getting into online and QR-based payments—apparently as many as 6 in 10 link

An anonymous source in North Korea told Daily NK that around 60% of people in Pyongyang use mobile phones for purchases, with 40% doing so in the provinces. Electronic payments, including mobile apps and QR codes, are gaining popularity due to convenience, with home delivery being a key advantage. Some women even joke that it’s more reliable than their husbands.

The country’s government hackers have targeted several Southeast Asian countries with a malware campaign over the last year designed to create backdoors into systems at important organisations link



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