Legal Crypto In DPRK

Cryptocurrency in the DPRK

The legal status of cryptocurrency in North Korea (the Democratic People’s Republic of Korea, DPRK) is uncertain, because there is no established framework for it and the country is largely cut off from the outside world in terms of financial markets. Now now, the DPRK has no clear domestic law on cryptocurrency usage, trade and ownership, and it has little information on these cryptocurrency activities. The state’s dealing in cryptocurrency is largely connected with criminal activities – hackers and money laundering – to evade international sanctions. The following is a comprehensive overview covering the legality, the regulatory environment, exchanges, the means of exchange, and the current state of decentralized finance (DeFi) and non-fungible tokens (NFTs) with a table and key takeaways.

Legal Aspects of Cryptocurrency in the DPRK

Cryptocurrencies, such as Bitcoin, Ethereum, etc., are not considered legal currencies or financial assets under the laws of the DPRK. There is no public law that specifically makes cryptocurrencies legal or illegal for domestic use. The highly regulated economic environment as well as limited access to internet and state surveillance imply that it is rather unrealistic for citizens to use private cryptocurrency. The lack of any legal framework is in line with estimates that the DPRK has not focused on regulating cryptocurrencies in order to facilitate legitimate economic activities.

The DPRK’s use of cryptocurrencies is largely state-sponsored and illegitimate. Nation state-sponsored cyber actors including the Lazarus Group have carried out notorious cryptocurrency exchange and DeFi-related hacks in order to pilfer money. The activities are meant to bypass international sanctions, launder money and finance state projects, such as developing weapons. For instance in 2023, North Korean hackers was said to have stolen $600 million worth of cryptocurrencies, illustrating the state’s tactical use of digital assets beyond the bounds of the law.

Cryptocurrency market regulation laws

The DPRK does not have a Cryptocurrency regulation policy EnterLines_2017 Polynomial_2017 Smith_2016 as well as any known guidelines or procedures in place. “Unlike countries like South Korea, where such laws as the revision on the Special Reporting Act were established, there is no such law [in the DPRK]. There are reports that in the past, before 2018, several people were arrested for bitcoin mining activities and their assets confiscated, which reflects some initial hostility towards decentralized cryptocurrencies. Yet sensing an opportunity the state has now done a volte face to embrace cryptocurrencies so long as it’s a way of promoting its own ends– not by formulating domestic laws as normal.

A lack of financial rules correlates with the DPRK’s financial exclusion amidst international sanctions by the UN and others. Cryptocurrencies allow the state to circumvent these constraints, and the absence of domestic regulation encourages criminal activity. The legal system of the DPRK cannot regulate or take action against financial crimes involving cryptocurrency, thus making the regulatory function even more difficult.

Exchanges and Exchange Mechanisms commonly used

There are no legal cryptocurrency exchanges in the DPRK. The country's limited internet infrastructure and state-run economy don’t allow for the creation of the domestic exchanges for public use. Instead, cyber operations by North Korean state actors aim at foreign centralized exchanges and Defi platforms. Typically attributed to groups like the Lazarus Group, these operations steal cryptocurrencies and launder them to hide their origin.

North Korean actors use different means of exchange, such as hacking centralized exchanges to capitalize on the security flaws of foreign exchanges and steal cryptocurrencies, targeting decentralized protocols with DeFi exploits in order to move funds through vulnerabilities in smart contracts, employing mixers, tumblers, and cross-chain swaps for money laundering to help cover the tracks of stolen funds, and demanding victims of cyberattacks pay cryptocurrency ransoms via ransomware and extortion. These tactics are not available to ordinary Iranian people because access to the internet is restricted to the small government elite, while private trading of cryptocurrencies also does not exist thanks to state controls on currency holdings.

DeFi Market

On the domestic level, the DPRK has no DeFi. There is no underlying infrastructure to either support domestic DeFi offerings or to enable citizens to access the greater DeFi world. But DeFi protocols are a major focus for North Korean state-sponsored hackers. The decentralized, pseudonymous world of DeFi also makes it appealing for bad actors – it’s more difficult to regulate than centralized exchanges. North Korean cyber groups methodically leverage DeFi flaws, pilfering funds and obfuscating laundering trails in intricate ways.

NFT Market

There is no NFT market in the DPRK. Access to NFTs is only possible to a global platform integrated with cryptocurrency wallets, and the internet, which the ordinary person don’t have. Furthermore, NFTs created or traded domestically, do not exist, and for legitimate purposes the state has not shown any indication of interest in this market. North Korean hackers would likely go after NFT markets in the context of general cryptocurrency-stealing activities rather than one-off NFT-related attacks, and NFT-related thefts are less widely reported than the theft of exchanges and DeFi sites.

Summary of Cryptocurrency Landscape in the DPRK

The following table provides a concise summary of the key aspects of cryptocurrency, DeFi, and NFTs in the DPRK:

Aspect	Status
Legality	Not recognized as legal tender; no explicit laws on use or ownership.
Regulatory Framework	No formal regulations; state exploits cryptocurrencies without oversight.
Domestic Exchanges	None; state actors target foreign exchanges via cyberattacks.
Methods of Exchange	Hacking, DeFi exploits, money laundering, ransomware (state-driven).
DeFi Market	No domestic market; targeted by state hackers for illicit gains.
NFT Market	Nonexistent; potential target for state-sponsored hacking.

Key Observations Regarding Cryptocurrency in the DPRK

Key takeaways not covered in the main part of the text:

• In this sense the operations around crypto are centralized, and indeed under state control, with elite cyber units orchestrating attacks in order to optimize the financial effect.
• The DPRK use of cryptocurrencies is an economic lifeline, as it provides access to funds that are off-limits under sanctions.
• Hacking campaigns target high-value targets, including some of the largest exchanges and DeFi protocols, to guarantee large profits.
• The state invests in cyber prowess for elite cyber operators, and they train hackers on how to attack emerging block chain technology.
• International efforts to prevent DPRK’s cryptocurrency theft are hampered by the anonymity and international nature of blockchain transactions.

Conclusion

North Korea’s cryptocurrency ecosystem is not recognized, regulated, or existent in the local (domestic) market. Foreign state actors use cryptocurrencies, DeFi, and possibly NFT markets as sources of funding for their nefarious activities while exploiting the decentralized nature of the technology to circumvent sanctions. Lack of infrastructure and internet and lack of access are reasons for private use not being so widespread but the state is more interested in cyber operations on the global platform. The table and key insights from above recap essential features of this complicated environment.