The currency facilitates the process of transferring goods and services. In simple terms, it is a unit of money exchange in everyday life. In addition, it includes goods and services. Currency convertibility is the right of the holder of a currency to exchange it for another currency, at exchange rates. The types of currency convertibility are classified mainly into external and internal convertibility; They include the current account, the convertibility of the capital account as well.
External convertibility is defined in terms of free exchange of currency holdings by non-residents, ensuring exchange rates within official margins. External convertibility is only partial convertibility. Internal convertibility is defined in terms of the absence of restrictions on the ability to exchange currency to acquire and hold foreign currency. This currency can be transferred to non-residents for any purpose. The total convertibility of the currency is the total or aggregate sum of the internal convertibility and the external convertibility.
The gold standard was established as each coin was identified in terms of its value in gold. This enabled and outlined a system that links all currencies in terms of fixed exchange rates. Gold has certain characteristics that are recognized internationally and are used in trade and business through an international monetary fund. Features such as storage, practical, convenient, transferable, portable make it a standard product that can be divided into standard units such as ounces.
Gold is very expensive to produce; therefore, it restricts its supply fast. The gold exchange standard meant an international system, in which each country had to nominate and fix the value of its currency with respect to gold. This created a complete system connecting the currencies of all the countries in the world.
The types of currency convertibility are identified by the importance given to convertibility associated with economic objectives. Current account convertibility is vital for independent or unilateral service, investment, merchandise, income and transfer traders. Developing countries have adapted three methods, which are, the pre-ad approach, the by-product, and the front-loading approach.
Capital account convertibility deals with financial assets. It provides options and freedom to convert domestic financial assets into foreign assets and vice versa at the exchange rate, already determined by the markets.
Ecurrency follows all the rules and regulations associated with the currency using a very current and effective technology, the Internet. Ecurrency allows you to send and receive money immediately around the world, to family and friends. It makes it easy for business transactions to be completed instantly. You can exchange real-time online payments for sales, auctions, etc. Bulk payments can be made with a single transaction. Bill payments have been simplified. Standing order payments are facilitated.
Various types of currency convertibility facilitate the conversion of money, assets, goods, services to your choice of currency anywhere in the world.