Restricted currencies refer to currencies that have been subjected to specific controls by the respective government to ensure the relative stability of those currencies, at least that’s often the offical stance. This in contrast with freely convertible currencies.
Some of the reasons why currencies can be restricted is to ensure that no currency fluctuation would harm the economy of the country, another reason is that governments prefer to keep the possibility to print more money.
Fluctuations in a country’s currency lead to trade imbalances which would in turn make an economy fragile. On the other hand, trying to avoid people from freely trading currencies can lead to inflation.
Most of the countries had put restrictions on their currencies until the late 1980s when many countries lifted those restrictions. Fluctuation in currencies is a result of monetary policies, economic growth and the value of products that a country produces. Countries that have fragile economies, changes in demand and supply are likely to affect either positively or negatively the competitiveness of a country’s exports. Some of the other reasons why there is currency restriction include:
- Avoiding devaluation in the currency
- Avoiding capital flight, e.g. China
- Ensure that foreigners get access to tourism and specific businesses only (e.g. Cuba)
With the advent of Bitcoin restricting the free exchange of currencies is becoming much harder to enforce. China’s haphazard attempts to ban Bitcoin are a good example of the issues that governments face around this. On the one hand they want to keep money inside the country, on the other hand governments are also aware that Bitcoin may end up becoming the world currency, in which case their country would be seriously disadvantaged by “banning” Bitcoin for an extended period of time. And of course, many politicians have already decided to start buying Bitcoin themselves.
Currency restriction is carried out in different ways from one country to another. However, the following are some of the common types of currency restrictions.
- Limiting the purchasing of foreign currency
- Restricting the use of foreign currency in a country by banning residents from holding foreign currencies
- Fixing exchange rates instead of allowing exchange rates to be determined by the market forces
- Limiting the amount of currency one can import or export
- Prohibiting exchange of currencies in a country or allowing currency exchange to be carried out by government retailers only
Reasons why currencies are restricted
If a country is facing an economic crisis, the government may limit the exchange of currency. Among the reasons of restricting currencies is supply and demand factor. When many people buy currency, the exchange rate rises and when few people sell currency the exchange rate declines. This in the end helps to inflate the value of the currency artificially.
On the other hand, by limiting international currency exchange, it helps to avoid a country’s currency from reaching the market. This makes it difficult for investors to trade their currencies in other countries without having to exchange it in their home country. In some countries such as Venezuela and Cuba, currency restrictions are carried as a political decision. This is done especially due to sanctions and a way of controlling trade and people from visiting the country.
List of Restricted Currencies
Restrictions keep on changing from time to time. Therefore, to be sure about the restricted currencies, visit your local bank or embassy so that you can know whether you can buy, sell or send the following currencies.
|Angola||Angolan Kwanza (AOA)|
|Armenia||Armenian dram (AMD)|
|Bahamas||Bahamian dollar (BSD)|
|Barbados||Barbadian dollar (BBD)|
|Belize||Belize dollar (BZD)|
|Brazil||Brazilian real (BRL)|
|Cameroon||Central African franc (XAF)|
|China||Chinese yuan or Chinese Renminbi (CNY)|
|Cuba||Cuban peso (CUP)|
|Egypt||Egyptian pound (EGP)|
|Ethiopia||Ethiopian Birr (ETB)|
|Fiji||Fijian dollar (FJD)|
|Georgia||Georgian lari (GEL)|
|Ghana||Ghanaian cedi (GHS)|
|Iran||Iranian rial (IRR)|
|Sri Lanka||Sri Lankan rupee (LKR)|
|Libya||Libyan dinar (LYD)|
|Malaysia||Malaysian ringgit (MYR)|
|Mauritius||Mauritian rupee (MUR)|
|Morocco||Moroccan dirham (MAD)|
|Myanmar||Burmese kyat (MMK)|
|Namibia||Namibian dollar (NAD)|
|Nepal||Nepalese Rupee (NPR)|
|Nigeria||Nigerian naira (NGN)|
|North Korea||North Korean won (KPW)|
|Pakistan||Pakistani rupee (PKR)|
|Papua New Guinea||Papua New Guinean Kina (PGK)|
|Samoa||Samoan Tala (WST)|
|Russia||Russian ruble (RUB)|
|South Africa||South African Rand (ZAR)|
|Sudan||Sudanese pound (SDG)|
|Tunisia||Tunisian dinar (TND)|
|Ukraine||Ukrainian hryvnia (UAH)|
|Uzbekistan||Uzbekistani som (UZS)|
|Venezuela||Venezuela bolivar (VEF)|
Sending money to a country with a restricted currency
When a country’s currency is restricted from trading the cost of sending money to that country will be significantly more expensive. Even with services such as Transferwise.