Has any government throughout history banned foreign currencies? It happened in Zimbabwe in 2019 for example. How about other countries?
I’m also interested in broader answers, like governments banning alternative forms of currencies (for example, banning ownership of gold as happened in the US in 1933).
Has any country forbidden by law its citizens to use anything else than their country’s currency?
This has happened a few times before, and is usually a rather extreme measure used to promote the use of, and trust in, local currency, as opposed to transactions being conducted using a more stable foreign currency, most often USD.
In 2011, Indonesia banned foreign currencies being used in domestic cash transactions:
On 28 June 2011, the Indonesian president signed law Nr. 7/2011 on
currencies, requiring cash transactions within Indonesia to be
conducted only in the local currency (art. 21(1) of the law). The ban
shall not hold for the following exceptions listed in the law:
- a. certain transactions within the framework of the implementation of
budget revenues and expenditures;
- b. accepting or awarding grant
- c. international trade transactions;
- d. bank deposits in
foreign currencies; or
- e. international financing transactions.”
The regulation came into force
on the day of its issuance but entities had one year to comply with
the new provisions.
Trust in the rupiah has been fragile ever since the Asian financial
crisis in the late 1990s, when its value went into free fall and
Indonesia went under an International Monetary Fund rehabilitation
program. The rupiah has become one of Asia’s worst-performing
currencies this year, depreciating around 7% against the dollar.
Bank Indonesia says the prohibition against foreign currency in
domestic transactions is intended to reduce reliance on the dollar and
other foreign currencies and mitigate against capital outflows.
According to Bank Indonesia, transactions within the country in
currencies other than rupiah amount to $73 billion a year.
These laws are still in force.
In a similar vein, in 2015 the Bank of Nigeria banned commercial banks from accepting deposits of foreign currencies.
On 5 August 2015, the Central Bank of Nigeria (CBN) prohibited
commercial banks to accept deposits of foreign currency cash. The
policy was published in a circular by the CBN’s Director of the Trade
and Exchange Department, Olakanmi I. Gbadamosi. Account holders which
made a foreign currency deposit prior to the announcement by the CBN,
are advised to withdraw their amount in the foreign currency or naira
The CBN stated that the measure is supposed to counter
illicit financial flows in the Nigerian banking system. The Nigerian
government is impeding access to USD since mid-2015. The goal of its
strict monitoring of cash flows is to avoid foreign currency reserves
to deplete as oil prices are falling. Crude oil exports represent
Nigeria’s main source of US Dollars. The policy is also connected to
the government’s national development plan which emphasizes import
substitution, i.e., the protection of local businesses from
This measure, however, seems to have been relaxed recently.
Section 107 of California’s Corporation Code banned individuals or entities from “[issuing] or [putting] in circulation, as money, anything but the lawful money of the United States.”, however this was repealed in 2014.
In addition, some governments have previously sought to ban alternative assets used in place of currency. You’ve mentioned the 1933 US ban on ‘hoarding’ gold. India, as well, has enacted several regulations on gold over the years, most prominently the (now repealed) Gold (Control) Act, 1968, which prohibited citizens from owning gold bars and coins.
Bitcoin and other cryptocurrencies seem like another obvious example, and although many countries have not yet adapted their laws to explicitly legalize or criminalize this type of asset, many have. There is a fairly comprehensive list here, which I won’t reproduce in this answer, but regulations range from an outright ban (e.g. Algeria, Bolivia, Nepal), to a ban on use as a payment method (Vietnam, Indonesia), to a ban on banks facilitating Bitcoin transactions (e.g. Canada, Colombia, Jordan).
Currency controls or foreign exchange controls have happened time and again in history, taking different forms. At the extreme end, all foreign currency must be surrendered to the government at the official exchange rate, which might differ from the market rate.
- The GDR banned the possession of Western currency until the 1970s.
- I’m not sure when the Soviet Union lifted restrictions, but in practice they crumbled by the 80s (not sure when that started).
In USSR, any dealings with foreign currency without a special permit (in essence, allowing exporters to get paid in currency and immediately trade them for roubles at the central bank and allowing outgoing travelers to get some currency for expenses, with any remainder to be traded back upon return) was a crime. (see RSSR Criminal Code article 88)
Dealing (‘speculating’) in foreign currency was considered a very serious offence, up to the capital penalty, which was added in 1961 during the case of three black market currency traders Rokotov, Faibischenko and Jakovlev which were sentenced to death and shot for running a scheme that bought currency off of foreign tourists.
There is even a wiki article on it, Argentina currency controls (2011-15):
Those controls limited the ability to buy or sell any foreign currency. The restriction was informally known in Argentina as “Cepo cambiario” (Spanish: exchange clamp).
The first restrictions were imposed on October 31, 2011. The Tax and Customs Authority, AFIP, required that individuals and businesses who sought to buy dollars request permission, which may depend of the financial status of the buyer. However, the implementation of the rules was arbitrary. In February, restrictions were applied to all international payments in dollars, such as imports. This also affected the ability of foreign investors to return their earnings to their own countries.
The use of credit cards abroad was also restricted. As of May 2012, people could only buy dollars for 25% to 40% of their wages.
In June 2012, AFIP forbade the purchase of dollars, except for a limited number of activities. As the country had a high inflation at that point, people used to buy dollars to keep the value of their money. The use of dollars for tourism received more limits a couple of months later: people would only receive the local money of the country that they visited, and only 7 days before the trip.
Argentina had pegged the value of the peso between 1991 and 2002 in an attempt to control hyperinflation. Once the peg was lifted, people were so used to operating with values in dollars (and keen on not losing their money) that it was very usual for people to have their reserves in dollars instead of pesos. This led to another set of problems, and I remember at one point of the exchange clamp the government was even confiscating dollars, which caused a massive number of people to run away to other countries with their money to avoid losing it.
The list here seems pretty complete. Most, if not all of the countries are either socialists or socialist “sympathizers”. The outliers in the trend seem to be Russia, India and Ukraine, although I’m not sure about India.
Romania before 1989
In Ceaşescu’s Romania, it was illegal to possess foreign currency (Romanian):
Possession of foreign currency was forbidden, the few Romanians who
had legally entered into its possession could use it exclusively for
the purchase of goods from the network of specialized state stores
The regime’s appetite for foreign currency was so big, that they even sold people for it (Romanian).
As a side note, it seems that Zimbabwe politics have Ceasescu’s economical policy as a source of inspiration.
Recently the country of Nepal banned Indian Rupees above 100.
Nepal had been an ally and a de facto vassal of India for a long time. The royal house of Nepal was a de facto Indian stooge. Hence India had a free access to both Nepal’s domestic affairs and foreign policies. Indian Rupees was freely usable in. Nepal.
Nepal received some benefits in return. Nepali and Indian citizens do not need visas to visit or live in each other’s counteies. Nepali citizens called Gurkha are also allowed to enroll in Indian army.
Then with the help of China, Nepali maoist guerrilas toppled the monarchy and declared Nepal a republic. So slowly they are parting away from India.
Recently, they banned the use of Indian Rupees above 100.