North Korea does maintain a banking system; however, its nature and function differ significantly from those found in capitalist countries. 

A key distinction is that North Korean banks operate as state-run institutions. Their primary role is to manage funds strictly within the confines of the state’s centrally planned economy. 

Initially, North Korea employed a mono-banking system, characterized by the sole existence of the Central Bank of the DPRK, with no commercial banks. 

Already suffering from a lack of public trust for various reasons, North Korean banks saw this distrust deepen further following the 2009 currency reform.

This deep-rooted distrust in the official financial system, coupled with the proliferation of jangmadang, or unofficial markets, has led locals to abandon formal banking services, increase their cash holdings, and resort to private financing. As a result, cash predominantly circulates within these unofficial markets. 

In response to growing distrust and dissatisfaction with the financial system, North Korea transitioned from a mono-banking system to a dual system, allowing the central bank and commercial banks to fulfill their respective roles. 

Despite the authorities’ efforts, it remains uncertain whether the nation’s official banking system can effectively replace the deeply entrenched practices of private financing. 

Let’s explore North Korea’s banking and financial system in more detail.