I fully understand how currencies are pegged at a certain rate, but transact at a different rate. I cannot wrap my head around currencies that can’t be converted. It makes no sense to me.
In: Economics
So a non-convertible currency is just the result of some kind of law or regulation that makes trading the currency for others illegal in someway.
But that definitely doesn’t mean a black market won’t exist (it almost certainly will). So it’s not like it’s *impossible* to trade, people can trade basically anything for anything else if you find two parties that agree to do the trade. It’s just illegal.
Non-convertible currencies are restricted by a country’s government to protect its economy. These are often countries with volatile economies that don’t want to risk depleting their foreign currency reserves. So, they limit who can exchange their currency and control its value, keeping it insulated from global market forces.
Non-convertible just means you can’t trade the currency on the open market. You have to use a government controlled conversion*
Sometimes the restriction is self imposed (chile) sometimes it’s outside nations that don’t allow the currency on the exchanges (North Korea)
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