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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?

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  • Perhaps you would be interested in the "bullionist" controversy in the book of Rothbard. Classical Economics. This happened at the beginning of the XIX century. Compared to the "socialist" tendency in the answers, this happened in England. – user2820579 Jun 18 '20 at 17:21
  • Not sure this is exactly what you’re looking for, but some of the U.S. colonies forced merchants to accept/use their colonial currency (many merchants avoided doing so because of the crazy inflation of colonial currency). – Franklin Pezzuti Dyer Jun 20 '20 at 14:43
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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.

Indonesia

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 abroad;
  • 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.

Later, in 2015, the Bank of Indonesia pushed through a regulation which banned foreign currencies being used in all domestic transactions:

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.

Nigeria

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 equivalent.

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 international competitors.

This measure, however, seems to have been relaxed recently.

California

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.

Other assets

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).

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    A historic example might be the German Democratic Republic (East Germany). Owning the Western Mark was officially illegal until 1974, but it was used extensively on the black market. A common code was to offer goods and services in exchange for "blue tiles". Which meant the blue 100 Western Mark notes. – Philipp Jun 17 '20 at 11:00
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    "In a similar vein, in 2015 the Bank of Nigeria banned commercial banks from accepting deposits of foreign currencies." Wait, so how am I supposed to do business with that Prince who keeps e-mailing me about a bunch of Euros or USD that he's going to split with me? – reirab Jun 18 '20 at 1:39
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    @Philipp, same in USSR. Possession of any currency but Soviet Ruble meant KGB investigation. – user28434 Jun 18 '20 at 14:15
  • I'm curious about that California example - would that affect things like, say, "Disney Dollars"?, These were used as currency in Disneyland (also Disney World, but that's not in CA) starting in 1987, long before the law was repealed. In fact, they only stopped printing them in 2016, after the law was repealed. – Darrel Hoffman Jun 18 '20 at 15:23
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    It's ironic how banning other currency as a "…measure used to promote the use of, and trust in, local currency" is a clear signal that such a trust is undeserved. – pipe Jun 19 '20 at 2:30
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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).
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    Britain had exchange control regulations from the end to the war until the 1970s. (They may have existed before that.). All UK residents had to declare any foreign currency holdings. During the sterling crises of the 1960s Britons were severely rationed on the amount of foreign currency they could buy to go on holiday. – WS2 Jun 17 '20 at 18:40
  • @WS2, yes, but that was less extreme than a ban on possession. – o.m. Jun 18 '20 at 3:47
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    Any British citizen returning to the UK after residence abroad had to declare and, I feel sure, convert any important amount of foreign currency or foreign bank accounts. I can't remember the exact details. – WS2 Jun 18 '20 at 6:58
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    Communist Poland banned possession of foreign currencies up to 1956. nbp.pl/en/publikacje/bankoteka/… page 40 – filo Jun 18 '20 at 7:24
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Soviet Union

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.

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Argentina

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.

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    The cepo has been restored on 2019 after a huge devaluation triggered by the results of the primary elections, and both the then-exiting administration and the current one kept adding restrictions since then. – mgarciaisaia Jun 18 '20 at 20:49
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    I only joined this community to upvote this – jmm Jun 19 '20 at 20:46
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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.

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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 ("Comturist" shops).

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.

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Recently, Nepal banned denominations of 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 could influence both Nepal's domestic affairs and foreign policies. Indian rupees could be used 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.

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