Legal Definitions - blocked currency

Blocked Currency

Blocked currency refers to money that cannot be freely moved, converted into another currency, or transferred out of a specific country due to government regulations, economic sanctions, or other legal restrictions. These funds are essentially "frozen" within the country's financial system, limiting their usability for international transactions.

• Example 1: Repatriating Corporate Profits

  A multinational technology company, TechGlobal Inc., operates a subsidiary in Country A. After a successful year, the subsidiary earns a significant profit in Country A's local currency. However, Country A is currently facing international economic sanctions, which include strict controls on capital outflow. When TechGlobal Inc. attempts to convert these profits into U.S. dollars and transfer them back to its headquarters, the transaction is denied by the central bank of Country A.

  This illustrates blocked currency because the profits earned by TechGlobal Inc., although legitimate and available within Country A, cannot be freely moved out of the country or converted into a different currency due to the government's sanctions and capital controls. The funds are effectively trapped within Country A's financial system.

• Example 2: Individual Savings Transfer

  Ms. Elena Petrova, a citizen of Country B, decides to emigrate to Country C. She has accumulated substantial savings in Country B's local currency over many years and wishes to transfer all her funds to a bank account in Country C to purchase a new home. However, Country B has strict currency controls that limit individuals to transferring only a small, fixed amount of money out of the country per year.

  In this scenario, Ms. Petrova's remaining savings, beyond the permitted annual limit, become blocked currency. Despite being her rightful money, she cannot freely transfer the bulk of her funds out of Country B due to the government's regulations designed to control the flow of money across its borders.