The National Bank of Kyrgyzstan has drafted a resolution proposing the introduction of a fee for exchanging old-design U.S. dollar banknotes, often referred to as "white dollars." These banknotes, issued before 2006, remain legal tender but present operational challenges, according to the central bank, 24.kg reports.
The bank noted difficulties faced by financial and credit institutions, as well as their clients, in accepting or exchanging "white dollars." Concerns include the risk of counterfeiting and a general preference for newer banknotes. Currently, individuals can conduct various transactions involving "white dollars" without restrictions, such as sending funds through money transfer systems, conducting dollar transactions via SWIFT, depositing into settlement accounts without the intent of making SWIFT payments, and exchanging "white dollars" at standard rates without additional fees. However, discrepancies have arisen in bank operations. While old banknotes are accepted without restrictions for deposit, clients often demand new banknotes when withdrawing funds, causing inefficiencies.
The National Bank highlighted several issues stemming from the influx of old-design U.S. dollars. Daily deposits of "white dollars" in significant volumes strain bank cash desks, leading to the accumulation of "illiquid" banknotes. This increases transportation costs and necessitates software updates to authenticate the old bills. Some old-design banknotes were flagged for quality issues, prompting temporary measures to mitigate operational risks. Banks previously exported "white dollars" to Turkey but now face restrictions as counterparties are unwilling to accept them, forcing banks to seek alternative export destinations for these banknotes.
To address these issues, the National Bank recommends introducing specific requirements for transactions involving U.S. dollar banknotes issued before 2006. This includes allowing banks to charge fees for exchanging "white dollars."
The proposal aims to reduce counterfeit risks, manage excessive cash reserves of old-design dollars, and facilitate the export of "illiquid" currency from Kyrgyzstan. Additionally, it seeks to address costs incurred by banks in importing and exporting cash and maintaining currency authenticity verification systems.
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