10 things you need to know about 'frozen dollars' in Egypt

Egypt's financial markets have been buzzing with concerns over the emergence of "frozen dollars," a term that is sending ripples of unease through the country's parallel market. These frozen dollars are being sold at a jaw-dropping 50% below the parallel market rate, raising questions about their authenticity and legality. Here are 10 essential things you need to know about this phenomenon:

1. A Disturbing Discount: The primary cause for alarm is the steep discount at which these dollars are being sold, a startling 50% below the going parallel market rate. This drastic price difference has sent shockwaves through Egypt's financial landscape.

2. Authentic but Risky: Frozen dollars are not counterfeit; however, their origin and legal status are questionable. They may be under U.S. sanctions or reported by international central banks, which could potentially expose traders to legal repercussions.

3. War Booty: These frozen dollars have a dark history. Many of them were acquired through illicit means, often trafficked and looted from other countries during times of war or revolution. This practice dates back to the first Gulf War in the 1990s.

4. Federal Reserve Alert: Due to their dubious origins and legal status, the U.S. Federal Reserve has issued warnings against the circulation of frozen dollars and may freeze them entirely.

5. Replacement Deadline: Egyptian banks work diligently to export frozen dollars to the U.S. Federal Reserve, replacing them with valid and updated currencies within a specified deadline set by the American bank. Once this deadline passes, central banks globally cease to accept these funds.

6. Global Crackdown: Several Arab nations have initiated campaigns to arrest individuals involved in the circulation or reliance on frozen dollars for illicit activities. For example, in 2020, the Lebanese Internal Security Forces issued a warning regarding a scam involving frozen dollars.

7. International Circulation: Frozen dollars are not limited to Egypt alone. Reports suggest that they are circulating in various Arab nations. In Iraq, there have been claims of frozen dollars connected to the former regime of Muammar Gaddafi, circulating at half their face value.

8. Parallel Market Jitters: Parallel market dealers are becoming increasingly cautious, especially when dealing with new clients. The presence of counterfeit and frozen dollars has made it challenging to detect fraudulent currencies, as these frozen dollars often have valid serial numbers.

9. Varied Prices: Frozen dollars are currently being sold at prices ranging from 25 to 35 Egyptian pounds, but only in limited quantities. This fluctuation in pricing reflects the uncertainty surrounding their value and legality.

10. Broader Economic Concerns: Amidst this frozen dollar dilemma, Egypt's parallel market exchange rate for the dollar has seen significant fluctuations, with rates exceeding 50 Egyptian pounds for buying. These economic uncertainties, combined with inflation concerns and the potential devaluation of the Egyptian pound, are causing tension in Egypt's financial landscape.

Traders, authorities, and the public are closely watching the situation unfold as they grapple with the challenges and legal complexities surrounding these enigmatic currencies. As Egypt navigates this financial puzzle, vigilance and caution are the orders of the day.