Today in Bishkek, when buying dollars, it is common to hear the question: ‘Will you take “white” dollars?’. This implies old notes of American currency, which differ from modern ones by a lighter shade.  However, the issue is far from just the colour. The problem is that some countries and financial institutions do not accept old dollars or take them at a discount. ‘Akchabar’ has decided to investigate the issue and find out how relevant the old banknotes are in the country and what difficulties may arise when selling or exchanging them.

WHERE DID THE ‘WHITE’ DOLLARS COME FROM?

There is a large volume of ‘white’ dollars In Central Asia, including Kyrgyzstan. According to exchangers, all this currency mass has arrived and continues to come to the domestic market from Russia. Due to Western sanctions, no new dollars have been officially delivered to the Russian Federation since 2022. Thus, the bulk of the currency cache in Russia is ‘white’ dollars, which are most likely part of the Russians' savings. It is worth saying that, according to the Central Bank of the Russian Federation, at the beginning of 2024 the currency volume in the Russians' hands reached $97.2 billion.

It should be clarified that ‘white’ are US dollars issued from 1996 to 2006 as they have a lighter shade. They are also inferior to modern banknotes from the point of technical characteristics, such as watermarks and other security features. However, there is no difference between the new dollar notes and the old-style notes as a means of payment. Under U.S. law, all Federal Reserve notes issued since 1914 are equivalent.

The reason for the influx of these dollars into the Central Asian currency market is said to be that the Russian Federation itself has allegedly stopped accepting them. However, according to authoritative Russian publications, this is not true. Old-style dollars are accepted by almost all institutions, with the rare exception of certain financial institutions. But there is another problem - the conditions are not always favourable.

PROBLEMS IN PRACTICE

But this practice is not only relevant to Russian cities. For example, in Pakistan and Argentina, a commission may be charged for the old-style dollar exchange or an unfavourable rate may be offered. There are also countries where such currency can be refused, such as Azerbaijan, Turkey, Thailand and some others. As for Kyrgyzstan, there are no official restrictions on the old-style dollar circulation.

"The National Bank has no authority to remove from circulation or in any way regulate the circulation of currency of other states, in this case, US dollars. According to the procedure for foreign currency cash exchange transactions in the country, approved in August 2019, banks, their exchange offices, and exchange bureaus are not authorised to impose any restrictions when buying, selling or exchanging currency, as well as setting different rates depending on the dignity, and year of issue of the monetary signs that have not lost the status of a means of payment. Thus, if you have encountered an unjustified refusal to exchange currency, you may contact the National Bank in writing. We will take appropriate measures within the framework of the NBKR's existing regulations", - the regulator commented.

Despite the National Bank's statement that there are no obstacles to the old-style dollar exchange, there are reports on the Net that some financial institutions are no longer willing to accept them because of the difficulties of subsequent sale of such currency. Although now most banks and exchange bureaus accept such dollars, there is a possibility that the owners of ‘white’ dollars may face difficulties in the future. In Lebanon, for example, because residents refuse them, banks currently do not accept old-style notes. A similar problem - citizens do not want to take ‘white’ dollars - was also reported by the domestic ‘Bakai Bank’.

‘White’ dollars have become less in demand among clients, and some refuse to accept them. As a result, such banknotes accumulate in the bank's cash desks. To solve the surplus problem, old-style banknotes are exported and exchanged abroad, which entails additional transportation costs and correspondent banks' commissions. These costs are included in the fee for cashing US dollars. Despite these difficulties ‘Bakai Bank’ continues to work with banknotes of different years of issue, seeking to minimize fees and meet the needs of its customers" - this information was posted by the bank on its website on October 18.

WHAT SHOULD THE OWNERS OF WHITE DOLLARS DO?

At the same time, the ‘white’ dollar owners in Kyrgyzstan, according to expert Iskender Sharsheev, can take certain steps to protect their interests. Firstly, he suggests filing a written complaint with the National Bank if commercial banks or exchange bureaus refuse to accept old-style banknotes without legal grounds.

"The regulator is obliged to take measures in compliance with the current regulations. In addition, not all banks and exchange bureaus refuse to accept ‘white’ dollars. Accordingly, owners can find institutions that comply with the National Bank of the Kyrgyz Republic's requirements and accept all valid banknotes, regardless of the year of issue,’ the expert explains.

Citizens can also contact legal experts or consumer protection organisations for advice and assistance in protecting their rights. In addition, it is possible to deposit cash dollars into a bank account.

"And already use them for non-cash payments or transfers. This can be an effective solution, as non-cash funds are not discriminated against by the year the notes were issued. Also, if possible, owners can exchange ‘white’ dollars in neighbouring countries when travelling abroad, where such notes are accepted without restrictions. Another alternative way to spend ‘white’ dollars in Kyrgyzstan is to pay for goods and services with such currency, as businesses can accept the currency as payment. Consider investing in financial instruments, for example, open a deposit in foreign currency. These are several options to use banknotes without the need to exchange them,' Iskender Sharsheev continued.

Meanwhile, he believes that refusal to accept ‘white’ dollars may stimulate the shadow currency market development, complicating the regulators' control and may lead to financial irregularities.

"If the population experiences unjustified refusals, it can undermine confidence in the banking system and exchange bureaus, which will negatively impact financial stability. Uneven acceptance of different notes can cause speculation and lead to exchange rate instability, which affects imports, exports and the overall economic situation. The National Bank may be forced to strengthen control and introduce additional regulations to prevent discrimination of banknotes by the year of issue,’ the expert concluded.

Thus, he cautions that problems with the dollar circulation may complicate foreign economic transactions and reduce the republic's attractiveness to foreign investors and tourists.