Controls are used to defend a peg, stop a run, or prevent hot money from destabilising a small financial system. The toolkit includes purchase limits for individuals, approval requirements for corporate transfers, minimum holding periods, taxes on inflows, and rules forcing exporters to convert foreign earnings at an official rate.
Their most visible market effect is a split between the official rate and a parallel or offshore rate. Where delivery is restricted, offshore pricing moves to the non-deliverable-forward market, which settles in dollars and never touches the restricted currency.
Historically they have been imposed at speed and lifted slowly, which is why a currency's tradability is a risk in itself for anyone holding local assets.
Example: an official rate of 300 per dollar alongside a parallel rate of 480 is a 60% gap. Anyone forced to convert at the official rate is paying a large implicit tax on every dollar earned.
Related: non-deliverable-forward, emerging-market-currency, currency-peg, devaluation