North Korea -- Securities Classification Regulatory Overview

It is crucial to understand that North Korea does not have a regulatory framework for classifying cryptocurrency tokens as securities in the way Western or even many developing nations do. Its approach to cryptocurrency, especially for its citizens and within its borders, is one of strict prohibition, surveillance, and severe penalties for unauthorized use.

The Democratic People's Republic of Korea (DPRK) operates under a highly centralized, command economy with an opaque legal system. Financial activities are tightly controlled by the state, and concepts like private capital markets, investor protection, or the issuance of private securities are largely alien to its legal and economic framework.

Therefore, the premise of North Korea classifying crypto tokens as "securities" in a regulatory sense does not align with its reality. Instead, any private use or issuance of cryptocurrency would likely be viewed through the lens of:

1. Violation of Foreign Exchange Laws: Strict controls on foreign currency.
2. Illicit Financial Activity/Money Laundering: Even if for personal use, it could be deemed as such.
3. Anti-State Economic Activity: Undermining state control over finance.
4. Sanctions Evasion: A constant concern for the regime itself, but also a charge against citizens found using unauthorized foreign assets.

Here's how North Korea effectively "classifies" and treats cryptocurrency, albeit not as "securities":

North Korea's De Facto Approach to Cryptocurrency

1. The "Legal Test" Used (Equivalent to Howey Test):

There is no known equivalent to the Howey Test or any publicly articulated legal test for classifying tokens as securities in North Korea. Such a test would imply a regulatory intent to distinguish between different types of tokens for market participation, which does not exist.

Instead, the "test" is effectively: "Is this cryptocurrency transaction or possession authorized by the state?" The answer is almost universally "No" for individuals. Any token or cryptocurrency found in the possession of a North Korean citizen without explicit, top-level state authorization would likely be considered:

• Prohibited asset: Violating state control over finance and foreign exchange.
• Contraband: Subject to seizure.
• Evidence of illicit activity: Leading to severe penalties.

2. Which Tokens are Considered "Securities" (or Prohibited Assets):

From the DPRK's perspective, virtually all privately held or transacted cryptocurrency tokens are considered prohibited assets. This applies to:

• Utility tokens: Tokens meant for access to a service.
• Security tokens: Tokens representing ownership or rights in an asset (if such a concept could even exist privately in NK).
• Payment tokens/Cryptocurrencies: Bitcoin, Ethereum, stablecoins, etc.
• NFTs: Any digital asset that could be traded.

The focus is not on the underlying utility or investment nature, but on the fact that they are decentralized, can facilitate capital flight, and operate outside of state control. The regime's primary use of cryptocurrency itself is for state-sponsored hacking, sanctions evasion, and illicit fundraising, conducted by specific state entities (e.g., Lazarus Group), not by private citizens.

3. Registration/Exemption Requirements for Token Issuers:

There are no known registration or exemption requirements for token issuers because:

• Private issuance of tokens (or any financial instruments) is strictly forbidden. No individual or non-state entity is permitted to issue financial assets outside of state control.
• Any attempt to "issue" a token would likely be viewed as a grave economic crime or an act of subversion against the state's financial monopoly, leading to immediate arrest and severe punishment.

4. Secondary Trading Rules:

There are no official secondary trading rules for cryptocurrency tokens in North Korea. Any form of secondary trading of cryptocurrency among individuals would be:

• Illegal: Violating foreign exchange laws and prohibitions on private financial dealings.
• Covert: Conducted entirely underground, risking severe punishment if discovered.
• Unregulated: By definition, as the state seeks to prevent it entirely.

5. Enforcement Examples:

Enforcement against cryptocurrency use by individuals is severe, often falling under laws related to economic crimes, foreign exchange violations, or even anti-state activities. While specific documented cases of individual citizens being prosecuted solely for "trading crypto as a security" are not publicly available (due to the regime's secrecy and the nature of their laws), enforcement examples related to prohibited financial activities include:

• Arrest and Imprisonment: Individuals caught possessing or transacting in unauthorized foreign currency (which crypto would fall under) face long prison sentences, often in forced labor camps.
• Asset Seizure: Any discovered cryptocurrency or assets derived from it would be confiscated by the state.
• "Anti-Socialist" or "Anti-State" Activities: Engaging in economic activities outside state control can be broadened to include these charges, which carry even harsher penalties, potentially including execution in extreme cases, especially if deemed to be aiding external forces.
• Public Shaming and Re-education: Less severe cases might involve public denunciation and forced re-education.

It's important to distinguish this from North Korea's state-sponsored use of cryptocurrency:

• North Korean state-affiliated hacking groups (e.g., Lazarus Group) are notorious for stealing vast sums of cryptocurrency from exchanges and DeFi protocols globally. This is done to fund the regime's weapons programs and circumvent international sanctions.
• These state actors operate outside of international law and any "classification" framework, using cryptocurrency as a tool for illicit finance, not as a regulated asset class.

Specific Legislation and Regulatory Guidance URLs:

North Korea does not publicly disclose its financial legislation or regulatory guidance in a manner accessible to the international community. There are no official DPRK government websites publishing detailed laws on finance, let alone specific guidance on cryptocurrency. The legal framework is largely internal, secretive, and subject to the arbitrary interpretation of the Workers' Party of Korea and its security apparatus.

Therefore, providing URLs to specific North Korean legislation or regulatory guidance on this topic is impossible and would be misleading.

Instead, understanding North Korea's stance comes from:

• Reports from international bodies: Such as the UN Panel of Experts reports on DPRK sanctions, which detail North Korea's illicit use of cryptocurrency.
  • Example: UN Security Council Resolution 1718 (2006) Sanctions Committee (General sanctions framework, detailed reports often mention crypto activities).
  • Example (indirect, reports often cite this): Various UN Panel of Experts reports to the DPRK Sanctions Committee. These are typically published as UN documents. Search "UN Panel of Experts North Korea cryptocurrency" on the UN Digital Library for specific reports.
• Statements and advisories from foreign governments: Particularly the U.S. Treasury Department (OFAC) and cybersecurity agencies, warning about North Korean cyber threats and cryptocurrency theft.
  • Example: U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) Advisories (Often contain details on North Korean illicit finance, including crypto).
  • Example: CISA and FBI Advisories on North Korean Malicious Cyber Activity (Contain information on state-sponsored crypto hacking).
• Academic research and analyses from NGOs: Based on defector testimonies, satellite imagery, and intercepted communications.

In conclusion, North Korea does not classify cryptocurrency tokens as securities. It treats all private, unauthorized cryptocurrency activity as illegal and highly punishable, viewing it as a threat to state control and a potential avenue for illicit activity or subversion. Its own use of cryptocurrency is exclusively for state-sponsored illicit finance.