What is Convertible Currency?

Convertible currency is short for "freely convertible currency." A currency that can be freely converted into foreign currencies and used as a means of payment for international settlement in foreign trade and non-trade economic exchanges. Issuing countries of convertible currencies usually do not take restrictive or discriminatory measures for the payment of their currencies for current account and capital account payments. The currency or gold acceptable to the other party shall be exchanged for the domestic currency deposited in the current account transactions of the other party. Under the gold standard, currencies of various countries are generally freely convertible. After the collapse of the gold standard, due to the crisis of balance of payments, many countries restricted the exchange of their currencies. ^[1]

Convertible currency

Convertible

1. It can be freely converted into other currencies;

2. It has no restrictions on the payment of international current accounts (that is, trade and non-trade items);

3. The management of the currency country does not adopt or implement a multiple exchange rate system or a differential exchange rate system.

Internal convertibility means that residents can freely hold foreign currency assets in the country, and can freely convert domestic currency into foreign currency assets in the country. External convertibility means that residents can freely hold foreign exchange assets abroad and freely pay abroad, but it does not necessarily mean that residents can freely hold foreign exchange assets and exchange foreign exchange within China. Generally speaking, convertible refers to external convertibility.

Generally speaking, currency is fully convertible, which means that a country has achieved both current account convertibility and capital account convertibility. The convertibility of the International Monetary Fund mainly refers to the convertibility of the current account.

The core issue of convertible currencies is the right to convert currencies.

Currency conversion rights are unlimited.

The right to currency conversion is a right guaranteed by relevant state laws.

1.Not freely convertible currency

2.Conditional convertibility of current account

3. Freely convertible current account

4.Conditional convertibility of capital and financial accounts

5, completely freely convertible

Currency internationalization