North Korea Adopts the Dollar as Illegal Tender
August 2, 2006: Counterfeit American hundred dollar bills have become, in practice, legal tender in North Korea. Everyone knows they're fake, but they are such good fakes that merchants call them "$70 bills," and often use them at full face value. North Korea has, for nearly two decades, financed it's defense establishment via illegal activities. These included producing and exporting illegal drugs and counterfeit U.S. currency. Of particular concern to the United States, the fake hundred dollar bills were of such high quality that, in some respects, they were superior to the real thing. North Korea has access to the special materials and printing equipment for producing currency. Much of this stuff is only sold to governments. However, since North Korea is a government, they get the quality materials and gear needed to make what American Treasury officials call "supernotes." These counterfeits can be detected, but with difficulty. As a result, thousands, if not millions, of them are in circulation, largely outside of the United States.And remember, these are not shops that a regular North Korean person can go to. These are for the powerful cognac and caviar crowd.
North Korean merchants prefer the U.S. hundreds because they are easier to handle. North Korea's currency, the won, currently has an exchange rate of about 3,000 won to one dollar. The largest denomination in North Korea is the 5,000 won note. That's worth about $1.67. So if you want to pay for something in cash, which many merchants prefer (don't ask…), those hundred dollar bills are a lot more convenient.
One reason so many of these bills began to show up in North Korea earlier this year is because the United States has recently blocked North Korean access to the international banking system. This was how North Korea used to spend many of these counterfeit notes. With that access blocked, the government apparently made deals with merchants (who did import/export business) to allow them to use the notes within North Korea, as long as they took the notes in payment for goods. The merchants realize the notes are good enough to easily put into circulation. Apparently the term "$70 note" came from the value the North Korean government got for the notes initially, as the counterfeit bills were used to pay for goods.
Due to recent flooding in four provinces, North Korea is in grave danger of another famine. This will not bother the counterfeiters of U.S. $100 bills.