North Korea has been clamping down on the use of foreign currency in some regions, causing difficulty for vendors and customers who are used to conducting business in tender other than the North Korean won [KPW: Korean People’s Won], the Daily NK has learned.

“Starting late last year, [officials] abruptly instigated a crackdown on the use of foreign currency in the marketplace, and now in the new year, it’s hard to find vendors who still use cash from outside,” a source in Yangkang Province told the Daily NK on January 15th.

“When it was common to use foreign currency, it was used not only to purchase expensive products but even simple goods such as tofu, which was bought with Chinese money [RMB],” the source said. “Now, if you’re caught using foreign currency, they confiscate your cash and products, so most people are using the local bills,” she explained.

Using foreign currency in North Korean markets is officially banned, but the practice carries on as an open secret--its use forming the dominant means of business and trade. Especially after the botched 2009 currency redomination, people have become more dependent on foreign currency--a practice predicated on strong notions that money from elsewhere is not subject to currency reform or exchanges, rendering it a much safer choice to wary residents.

Typically, even if the state issues directives ordering those who own foreign currency to exchange it for local bills, people mostly refuse to comply, lingering resentment and skepticism from the 2009 compelling them to find a multitude of ways to try to guard their foreign cash. 

Following the 2009 disaster, Pyongyang attempted to tighten controls on foreign currency, but in the end, it failed to turn around the markets. Since then, the state has turned a blind eye to foreign bills pervading the markets along the border areas, according to the source.

“The crackdown this time may be a measure from above [Central Party] to collect foreign currency from people, but it could also be an independent move by provincial security officials who want to use this money to offer bribes up to Party cadres,” she speculated.

Commenting on the swiftness of the change, she noted that just last month, buying even the simplest of things with RMB was standard practice, but now local currency must be used even for larger products, making things exceedingly inconvenient for residents. “It’s hard to tell how long this will continue on for, but no vendor is dumb enough to swap out his or her money for domestic money,” she said.

Trusted associates and good connections can alleviate some of these difficulties, but are still often a gamble in terms of repercussions. "Vendors who know each other well still use Chinese money in the process of making wholesale and retail purchases,” she said. “But even within vendors there are spies for the security department, so not knowing when you’ll get caught, people are refraining from using foreign currency in most marketplaces.”

In response to the continued clampdown, many residents have said, “We’ve fallen victim to it during the currency reform, so we’re not going to be fooled twice.” Others have remarked, “Each year the state tells us to place importance on certain things, but to us, foreign currency is our very life."

As of the 7th, 1 USD was worth roughly 8,150 KPW in North Korean markets, while 1 RMB traded for 1,320 KPW. In order to exchange North Korean money for one 100 RMB bill, residents would need 26 of the highest denomination 5,000 KPW bill, along with two 1,000 KPW, making it a total of 28 notes. As such, vendors have no choice but to carry around large bags equipped to hold thick stacks of the local notes.

Conversely, a source in North Pyongan Province reported that no evidence of this order exists in the region as of yet. “Using foreign currency is not an option, it’s a must,” the source said. “If they start cracking down on the markets, it’s not only local sales in the marketplace but trade that will experience significant damages because foreign currency will not be able to circulate,” she concluded.