What is a currency board? A strict way to fix an exchange rate
By SendPay Business · · 2 min read
A currency board is a strict form of fixed exchange rate. The local currency is tied to an anchor currency at a set rate, and every unit issued must be fully backed by reserves of that anchor currency.
How it works
- The government sets a fixed rate against an anchor, often the US dollar or euro.
- New local money can only be issued if matching anchor reserves come in.
- Anyone can swap local currency for the anchor at the fixed rate.
- The central bank gives up setting its own interest rates freely.
Real examples
Hong Kong has linked its dollar to the US dollar through a currency board system since 1983, keeping it within a narrow band around 7.8 HK dollars to one US dollar. Bulgaria introduced a currency board in 1997, tied first to the Deutsche Mark and later to the euro.
The trade-offs
A currency board builds trust and keeps exchange rates predictable, which helps trade. The cost is less control: interest rates largely follow the anchor country, even when local conditions need something different.
Where SendPay fits
SendPay platforms let customers hold GBP, EUR and USD and exchange between them at a fee the platform owner sets, powered by licensed partners. SendPay doesn't offer trading.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.