A report by the Financial Action Task Force (FATF) highlights how sanctioned states, notably North Korea and Iran, are increasingly using cryptocurrencies to finance illicit weapons programs. The report notes a doubling in the use of crypto for this purpose, with significant incidents like the theft of $1.4 billion from ByBit by North Korean hackers facilitating the country's nuclear activities. The FATF identifies blockchain technology as a critical vulnerability for proliferation finance networks, citing the effectiveness of mixing services and unregulated exchanges in laundering stolen funds. Experts warn that these developments indicate a growing sophistication among threat actors, with groups like Lazarus linked to such financial operations. Furthermore, the report suggests these networks might be coordinating their activities geopolitically, particularly in conflicts like the Russia-Ukraine war and Iranian military operations in the Middle East. The trend underscores the potential of cryptocurrencies to support illicit financial activities at scale, posing risks that extend beyond individual thefts.

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