North Korean hackers are likely to incorporate new play-to-earn (P2E) crypto games into their illicit cyber-enabled financial schemes.

Pyongyang has shown increasing interest and capability in utilising new financial technology to obtain valuable foreign currency required for its weapons development programmes. Given the growing popularity of cryptocurrency trading, North Korean hackers are likely to incorporate new play-to-earn (P2E) crypto games into their illicit cyber-enabled financial schemes.

Previously reserved for professional gamers winning massive cash prizes at national and global tournaments, video gaming has evolved to now provide amateur gamers and crypto enthusiasts with opportunities to earn large amounts of cryptocurrency with relative ease. Most video games use play-to-win (P2W) mechanics to entice players to complete a series of puzzles, tasks, and activities in order to "beat the game" or advance to the next level. Professional players typically participate in tournaments organised by third parties to win cash prizes and other financial rewards in order to earn money. P2E crypto games, on the other hand, use blockchain technology to enable the earning of cryptocurrency within the game or non-fungible tokens (NFTs) that can later be sold for cryptocurrency. The technological mechanics of P2E crypto games eliminate the need for tournaments or third-party organisers to provide players with potential financial rewards outside of the game, which introduces new financial risks into the online gaming world.

The online gaming industry has a history of illicit actors using its networks and user base to conduct and facilitate cyber-enabled financial crime. North Korean hackers have already demonstrated their ability and intent to exploit the online gaming community to Pyongyang's financial advantage. The Seoul Metropolitan Police Agency reported in 2011 that a joint operation involving North Korean operatives and several South Korean nationals compromised the personal data of approximately 660,000 South Korean citizens and generated at least 6.4 billion Korean won (approximately $5.3 million) for Pyongyang. According to the report, several South Korean nationals travelled to China to receive infected software for a South Korean online game from North Korean operatives. The software was allegedly created by North Korean computer programmers affiliated with the US-sanctioned Korea Computer Center (KCC). South Korean accomplices then sold and distributed the infected gaming software within South Korea, and Seoul police later arrested 15 people in connection with the case. While ultimately successful, this operation most likely required a significant amount of North Korea's limited logistical resources to plan the operation, as well as enlist and train all parties involved. In comparison to P2W games, the technological and financial mechanics of new P2E crypto games would allow Pyongyang to obtain valuable cryptocurrency with significantly less effort and resources.

The financial mechanics involved in P2W and P2E games differ significantly, raising a different set of potential financial risks. The majority of financial transactions involving P2W games involve players sending digital payments from their personal bank accounts or credit cards to either the game company to purchase in-game items, or to professional "power levelling" services to enlist gamers to play on their behalf to increase their level. Popular P2E crypto games, such as Axie Infinity, allow players to earn special in-game tokens that can be sold to other players within the game or to cryptocurrency exchanges for cryptocurrency. Axie Infinity players in the Philippines reportedly earned enough cryptocurrency in 2021 that the Filipino government passed legislation requiring players to pay income tax on earnings generated by the game. While most P2E crypto games give players NFTs or other tokens to trade for cryptocurrency, Coin Hunt World directly rewards players with cryptocurrency such as Bitcoin or Ethereum after completing certain tasks. The rapid expansion and diversity of different financial mechanics incorporated into P2E crypto games present a new genre of potential financial risks within the online gaming world.

While Pyongyang is unlikely to instruct its hackers to spend valuable hours playing P2E crypto games, it may instruct its talented software developers to identify vulnerabilities within the games and write codes that will allow the automation of in-game activities to earn cryptocurrency. North Korean hackers have already demonstrated significant success in obtaining cryptocurrency by issuing malicious codes that, when activated, can steal, extort, and obfuscate digital transactions. While no North Korean presence in P2E crypto games has been detected, Pyongyang may seek to manufacture and distribute P2E crypto game-specific software programmes that can rapidly complete in-game tasks to earn cryptocurrency at a rate faster than any human gamer could. The previous case of North Korean computer programmers creating malicious gaming software for purchase and distribution in South Korea suggests similar implications for P2E crypto games.

Pyongyang has successfully stolen millions of dollars' worth of cryptocurrency through sophisticated cyber operations targeting banks, cryptocurrency exchanges, and individuals over the years. Popular P2E crypto games are likely on North Korean hackers' radar for 2022, as they continue to expand their illicit financial operations in the crypto space.

Support us!