An inconvertible currency (also known as “non-convertible”, or “blocked”) cannot be traded under foreign exchange regulations and hence cannot be exchanged for other currencies.
A country may choose to make its currency inconvertible in order to prevent capital being moved to offshore destinations. Many South American countries (Chile, Brazil, Argentina etc.) choose to make their currencies inconvertible because of their history of domestic economic volatility.
Among many other consequences, an inconvertible currency limits the extent to which the country can engage in international transactions.Back to Glossary