A fully convertible currency, or freely convertible currency, is a currency that doesn't have any government restrictions on currency exchange. Obvious examples of fully convertible currencies are the US dollar and the Euro. In total, there are around 17 fully convertible currencies. There is no precise, straightforward definition of what constitutes as a freely convertible currency. Different institutions have varying criteria.
Advantages of freely convertible currencies
Freely convertible currencies are good news, in that they are very inexpensive to buy and sell. If your bank is charging you 4% in spread costs (the difference between the buy and sell rates), you can easily find a specialized broker who will undercut that by at least 50%.
Every year, the IMF engages in Article IV negotiations with central banks and governments around the world to determine, based on Article VIII, whether the currency is convertible or not. In addition to that, some currencies may be deregulated by the central bank and guaranteed convertible by the IMF, yet no global banking institutions will want to get involved with it (e.g. the Columbian peso).
Freely convertible currency list
This is not a canonical list, since various institutions have different definitions of a fully convertible currency
- Australian Dollar
- Bahrain Dinar
- Canadian Dollar
- Danish Kroner
- Euro
- Hong Kong Dollar
- Kenya Shilling
- Kuwait Dinar
- New Zealand Dollar
- Norwegian Kroner
- Pound Sterling
- Singapore Dollar
- South African Rand
- Saudi Arabian Riyal
- Swedish Kroner
- Swiss Franc
- UAE Dirham
- US Dollar
Convert currencies
Restrictions on currency exchange
Some countries completely forbid exchanging their currencies beyond a specific amount (e.g. the Cuban Peso and the North Korean Won). The only place to exchange these currencies outside of these restrictions is on the black market.
Partial restrictions
The Indian rupee is a partially convertible currency. India has put restrictions on trading the rupee. This usually leads to bad exchange rates when transferring money in and out of India. In our experience, these (mostly hidden) fees can add up to 10% at the €2000 bracket.
Non-deliverable forward
A non-deliverable forward (NDF) contract on non-convertible currencies can be used to attempt to mitigate the currency's volatility risk.
List of non-convertible currencies with an NDF market
- ARS Argentine peso
- BRL Brazilian real
- CLP Chilean peso
- CNY Chinese renminbi
- COP Colombian peso
- EGP Egyptian pound
- GTQ Guatemalan quetzal
- IDR Indonesian rupiah
- INR Indian rupee
- KRW South Korean won
- KZT Kazakhstani tenge
- MYR Malaysian ringgit
- PEN Peruvian nuevo sol
- PHP Philippine peso
- TWD Taiwan dollar
- UYU Uruguayan peso
- VEB Venezuelan bolívar
- VND Vietnamese đồng
Read more about NDF on Wikipedia
Is the Chinese Yuan fully convertible?
There's no clear yes/no answer to this. In fact, there are two yuans. Besides the widely known CNY there is the off-shore CNH. CNH is not regulated and is de facto fully convertible. That is, for transactions outside of mainland China, such as in Hong Kong and Singapore. If the transaction involves a party inside China, the regulations set by the Chinese central bank and SAFE, the Chinese Safe Administration of Foreign Exchange, apply.
So, there's still a lot of regulation and restrictions attached to moving CNH from off-shore to on-shore mainland China. Due to the recent economic problems in China, the Central Bank has increased the restrictions. This also means that transferring money into China has become more expensive and cumbersome for banks and companies.
We expect that full convertibility of the Chinese Yuan will be off the table until at least 2018.
Virtual Bank Account: a workaround for Exporters to Europe
When your business is exporting to Europe, the contracts and invoices with your customers are most often set in Euros. The Euro is freely convertible, but during the payment process to your local bank you're likely to get an exchange rate between 3 and 6% from the mid-market rate. Ultimately, these high spread costs shrink the margins of the exporter. With B2B Pay, you can get a free virtual bank account in Europe which will allow your customers to make a free SEPA payment. B2B Pay will subsequently forward the money to your local bank account for a 1% fee.
More information
- Wikipedia: Currency
- Wikipedia: Convertibility
- IMF surveillance, with more information about Article IV consultations
- IMF committee on balance of payments statistics (PDF)
How to open a bank account in Europe
We have a few guides to guide you through the process of opening a bank account in multiple European countries and explaining why a virtual bank account with B2B Pay may be a better alternative if you are transferring money outside of Europe and taking advantage of a better rate.
How to open a bank account in Andorra
How to open a bank account in Austria
How to open a bank account in Bulgaria
How to open a bank account in Croatia
How to open a bank account in Czech Republic
How to open a bank account in Cyprus
How to open a bank account in Denmark
How to open a bank account in Estonia
How to open a bank account in Finland
How to open a bank account in France
How to open a bank account in Germany
How to open a bank account in Greece
How to open a bank account in Hungary
How to open a bank account in Ireland
How to open a bank account in Italy
How to open a bank account in Latvia
How to open a bank account in Liechtenstein
How to open a bank account in Lithuania
How to open a bank account in Luxembourg
How to open a bank account in Malta
How to open a bank account in Monaco
How to open a bank account in the Netherlands
How to open a bank account in Norway
How to open a bank account in Poland
How to open a bank account in Portugal
How to open a bank account in Romania
How to open a bank account in San Marino
How to open a bank account in Slovakia
How to open a bank account in Slovenia
How to open a bank account in Spain
How to open a bank account in Sweden
How to open a bank account in Switzerland
How to open a bank account in the UK
How to open a bank account overseas
We have a few guides to guide you through the process of opening a bank account in multiple countries all over the world and explaining why a virtual bank account with B2B Pay may be a better alternative if you are transferring money outside of Europe and taking advantage of a better rate.
How to open a bank account in Australia
How to open a bank account in Brazil
How to open a bank account in Canada
How to open a bank account in the Cayman Islands
How to open a bank account in China
How to open a bank account in Colombia
How to open a bank account in Dubai
How to open a bank account in Hong Kong
How to open a bank account in India
How to open a bank account in Japan
How to open a bank account in Malaysia
How to open a bank account in Mexico
How to open a bank account in New Zealand
How to open a bank account in the Philippines
How to open a bank account in Russia
How to open a bank account in Singapore
How to open a bank account in South Africa
How to open a bank account in South Korea
How to open a bank account in Thailand
How to open a bank account in Turkey
How to open a bank account in the United States
How to open a bank account in Ukraine