North Korea confiscates dollars and yuan after declaring foreign currency illegal

North Korea banned the use of foreign currency this month and began confiscating yuan and dollars from citizens by stopping them on the street for random searches, sources in the country told Radio Free Asia.

Citizens are ordered to exchange their foreign currency for the domestic won, but they prefer the Chinese and US currency because it is believed to be more stable.

Inflation in the 1990s and 2000s had gotten so bad that Pyongyang revalued the won 100:1 in 2009, TThe government announced the change and then allowed people to convert only a certain amount of old won, making the rest worthless and wiping out the life savings of many citizens.

Fearing that another revaluation could come at any moment, most have lost faith in cattle.

But the new cattle-only policy could be an indication that authorities are raising hard currency to prepare for a full resumption of trade with China, which was suspended at the start of the coronavirus pandemic in 2020 and restarted only to a limited extent in 2022. . .

“Some wonder if the opening of customs trade between North Korea and China is imminent with the recent ban on the use of foreign currency,” a resident of the northwestern province of North Pyongan told the FRG Korean Service on condition of anonymity for safety reasons.

“This is because in the past, before periods of increased trade between North Korea and China, authorities had to remove foreign currency by issuing a ban.”

North Korea previously banned the foreign currency in January 2010, shortly after the revaluation, likely in an attempt to force the public to accept the revalued won. However, it had to lift the ban in February of that year due to runaway inflation that disrupted economic activity.

In May of that year, the South Korean government ended all economic exchanges with the North, forcing Pyongyang to increase trade with Beijing by around 30%.

The government is confiscating foreign currency from citizens in order to secure enough for when trade with China fully resumes, likely later this year, said a North Korean fugitive who once worked as the head of a military unit. that dealt with foreign currency. RFA on condition of anonymity for security reasons.

The former head of the unit, who settled in South Korea in 2016, said the North Korean government could not confiscate all of the people’s currency because they would never cooperate.

forced exchange

The policy was announced during weekly neighborhood watch unit meetings, a source in the northeastern province of North Hamgyong told RFA on condition of anonymity.

“Residents with foreign currency should exchange it for national currency at the market or in shops,” he said, adding that those who refuse to convert their stashes risk being randomly stopped and searched by the police.

“If they find foreign currency, they not only confiscate it, but they investigate the details of how they acquired it and how they are using it,” he said.

The North Pyongan resident described these searches as “tigers on the hunt for prey,” but even so, the government-backed money-exchange booth in the local market is not winning.

“Most residents have a very negative attitude towards the foreign currency ban order,” he said.

spent paper money

Another reason why people don’t like the won is because the most commonly used notes are now falling apart. Banknotes currently in circulation include 1,000, 2,000, and 5,000 won banknotes printed in 2008, and a newer 5,000 won banknote printed in 2014.

“The national notes are so worn that it is hardly worth sticking them or putting paper on them (to stabilize them),” he said. “Large-scale merchants have to hire people to pool money every night.”

North Korean banknotes are so low in value that they are not convenient, according to the North Hamgyong source.

“With 100 yuan being around 120,000 won, when it is exchanged (a 100 yuan bill), it becomes 120 1,000 won bills, and it is bulky to walk on,” he said.

“Some residents only exchange a small amount to avoid a crackdown from the authorities,” the source said. “However, most residents are protesting the government’s ban… They say that if the authorities cannot afford to change spent notes, then they are not in a position to ask them not to use foreign currency.”

Translated by Claire Shinyoung Oh Lee. Edited by Eugene Whong and Malcolm Foster.