North Korean Operatives Allegedly Launder Tens of Millions via USDC

On-chain investigator ZachXBT has raised concerns about the misuse of Circle’s USD Coin (USDC) by North Korean IT operatives, claiming that tens of millions of dollars have been funneled through the stablecoin with minimal intervention from the issuer. ZachXBT also criticized Ripple’s RLUSD, asserting that the stablecoin lacks real users and is propped up by deceptive adoption tactics.

ZachXBT's allegations come at a time when Circle, the issuer of USDC, recently applied to establish a national trust bank in the United States to oversee its reserve. The company had a successful initial public offering (IPO) in June, with a valuation of around $18 billion. However, ZachXBT's claims of illicit flows and lack of action from Circle have cast a shadow over the company's credibility.

In a series of posts on X (formerly Twitter), ZachXBT accused Circle of ignoring illicit transactions, calling it “a crime super cycle where no one cares.” He stated that USDC is being widely used by North Korean IT workers to receive payments, with recent related transactions reaching tens of millions of dollars. ZachXBT criticized Circle for claiming to be “compliant” while taking no action to freeze or monitor the funds.

Amid the controversy, one XRP supporter suggested switching to Ripple’s new stablecoin RLUSD as a potentially safer alternative. ZachXBT pushed back, stating that he trusts Circle, Paxos, or Tether infinitely more than Ripple. He mentioned that, unlike Circle or Tether, which at least have a base of organic users, Ripple has a history of “misrepresenting paid partnerships to make it appear like adoption.”

ZachXBT reiterated his position, asserting that RLUSD is “asset-backed and issued by a so-called trusted American powerhouse,” but ultimately lacks credibility due to what he characterizes as Ripple’s artificial growth tactics. The issue ties into broader geopolitical concerns as North Korea’s Lazarus Group, a state-sponsored hacking unit, has been linked to numerous high-profile crypto heists. As crypto adoption grows, coordinated action against North Korean cyber operations has become a priority for G7 countries.

ZachXBT's claims suggest that the user base of RLUSD is artificially inflated through deceptive adoption tactics. According to the analyst, the stablecoin's user base appears to be composed largely of bots and fake accounts, which are used to create the illusion of widespread adoption. This tactic, if true, would be a significant breach of trust for users and investors who rely on the stability and legitimacy of stablecoins.

The implications of these allegations are far-reaching. Stablecoins like RLUSD and USDC are integral to the crypto ecosystem, providing a stable medium of exchange and a hedge against the volatility of other cryptocurrencies. If users lose confidence in these stablecoins, it could lead to a broader loss of trust in the entire crypto market. This could have ripple effects on other stablecoins and the broader financial system, as stablecoins are increasingly being used for cross-border payments and as a store of value.

Ripple and Circle have not yet responded to ZachXBT's allegations, but the crypto community is closely watching for their reactions. The outcome of this controversy could have significant implications for the future of stablecoins and the broader crypto industry. As the market continues to evolve, it is crucial for companies to maintain transparency and integrity to build and sustain user trust.