In September 2017, President Donald Trump signed Executive Order 13810 .The order, titled “Imposing Additional Sanctions With Respect to North Korea,” instituted several harsh economic sanctions on the Democratic People’s Republic of Korea. Virtually all business activity between the United States and DPRK was to be halted immediately, including transferring “goods, services, or technology” between both individuals and organizations in the two nations. Americans caught engaging in transactions with the DPRK would have their assets frozen by the The Office of Foreign Assets Control. Although unique in its objective approach to economic regulation, Executive Order 13810 was the United States’ third attempt in just two years to combat the “provocative, destabilizing, and repressive actions and policies of the Government of North Korea” via economic sanctions. Both the North Korea Sanctions and Policy Enhancement Act and the Countering America's Adversaries Through Sanctions Act, passed in February 2016 and August 2017, used similar means to achieve the same end goal, each with lacking results. Despite their historical significance and widespread use, the continuation of severe human rights violations and ongoing nuclear missile development in the DPRK through 2021 suggests that sanctions are no longer the most effective form of economic agency in 21st diplomacy. Cryptocurrency, an ulterior, newly-relevant form of decentralized financial transaction, has instead been utilized by nations such as the DPRK to bypass traditional sanctions. Therefore, to counteract the growing obsolescence of centralized fiat currencies, innovative means of economic agency that account for the decentralized nature of cryptocurrency must be developed and implemented by world nations.
Traditional sanctions, like those imposed by Executive Order 13810, rely on centralized systems to account for the flow of finances between the United States and foreign countries. When international transfers and payments to and from the United States are made through banks or other centralized fiat exchanges, payments orders are automatically routed through a central system in New York. Banks use a digital service known as SWIFT to facilitate this process, and when needed, the federal government can use this data to identify sanction violations. A stored account of transactions, such as the database provided by SWIFT, is essential for any financial activity to occur legitimately. Both parties must ensure that their end of the transaction has occurred successfully via confirmation from a neutral source. SWIFT’s database acts as a centralized receipt of payment which can be viewed by both parties, therefore legitimizing transactions.
Throughout history, the verification of transactions without centralized third parties such as SWIFT, central banks, or governments has been impossible. This means that sanctions, which rely on the services of third-party verifiers, were once nearly insurmountable for those looking to transfer large sums of money. However, in recent years, cryptocurrency has emerged as a decentralized, transparent, and safe way to transfer any amount of money while also ensuring proof of payment and receipt for both parties. While government organizations record traditional transactions in centralized databases, cryptocurrency transactions are recorded on the blockchain: a decentralized ledger that automatically updates whenever a new transaction is made. While all transactions made on the blockchain are transparent, user identities are anonymous. Transactions are associated with the blockchain addresses of each party rather than their locations or names. Anyone can observe the exact time, date, and amount of any transaction made on the blockchain, but unless a user reveals their unique address, the identity of those involved in the transaction remains anonymous. If hackers leak someone’s address they can simply create a new wallet. The blockchain system ultimately allows for financial transactions to occur in a verified, legitimate manner without exposing the identities of involved parties to centralized organizations, providing a perfect alternative to the hurdles posed by government sanctions.
Blockchain technology and cryptocurrency have been quickly adopted by the DPRK as a means to offset the economic impacts of American sanctions. In February 2021, the US Justice Department released an indictment accusing the DPRK’s military intelligence service of cryptocurrency theft amounting to over $1.3 billion in cumulative funds from 2016-2021. This does not account for funds that may have been willingly transferred into the DPRK during this time period via the blockchain, potentially contributing to an even higher payout from blockchain related endeavors. Furthermore, in September 2021, American national Virgil Griffith pled guilty to charges of conspiracy after traveling to the DPRK to provide government officials with technical training on cryptocurrency and blockchain technology use.Griffith was accused of “undermining the sanctions” enacted by Congress and the President and is expected to serve up to seven years in prison.
The DPRK’s immediate success in cryptocurrency-related ventures, coupled with the inevitable assistance of foreign sympathizers, suggests that the nation’s grip on cryptocurrency will only grow with time. Therefore, due to the cryptocurrency’s ability to bypass restrictions posed by sanctions, it is unlikely that traditional sanctions will remain effective for much longer. Nations must now look to develop new methods of diplomatic agency which account for this significant advancement in technology. Given the decentralized nature of cryptocurrency, will worldwide regulation prove feasible? If not, can alternative, non-economic forms of diplomatic agency be formulated which do not result in unintended hostility or violence? These are the questions that nations such as the United States will need to address in order to successfully navigate the cryptocurrency revolution.