Counteracting Black Markets Through Currency Control

Posted on 3/19/2019

The use of Military Payment Certificates during the Vietnam War.

The presence of black markets is a fact of life during periods of unrest. Those unscrupulous enough to take advantage of these chaotic environments often find themselves lush with wealth, be it in the form of traditional currency, or in the form of goods like food, weapons or fuel.

Vietnam, a country with a well-established, pre-existing black market, found itself in an interesting situation with the arrival of US troops in 1965.

Infused with a fresh surplus of US currency, this market continued to grow, steadily destabilizing the economy of South Vietnam in the process. To combat this, the United States initiated a series of currency-control systems to curb the growing threat of economic warfare.

To do this, they issued Military Payment Certificates (MPCs), a form of scrip currency that had previously seen use shortly after the end of the Second World War and during the Korean War. On top of this, they created a system that could track any official transaction of these MPCs so as to monitor any potentially illicit dealings.

1968 Military Payment Certificate, Series 661, 5 Dollars, front. PMG graded 67 Superb Gem Uncirculated EPQ★.

Amongst the most pertinent of the threats presented by this black market was that of US currency falling into the hands of the enemy. There are two major problems that arise from this: First, it provides the enemy with a means with which to pay for espionage and collaboration between themselves and the United States through bribery and spies. Second, the US dollar is an internationally accepted hard currency that the enemy can then use to purchase resources for their own war efforts.

An example of this amassment of US currency can be seen throughout the war, wherein Communist China alone was able to collect nearly $350 million in a single month through the black market in Vietnam.

Another example of the sheer volume of currency in the hands of the Viet Cong can be seen when, in July of 1968, a unit of the 173rd Airborne Brigade uncovered a Viet Cong complex in the Vinh Thanh mountains. Inside said complex, they discovered a cache containing nearly $150,000 in US currency, with documentation revealing that it was being used by the local Viet Cong government as a stable means of financing their war effort.

With this in mind, the use of MPCs as a tried-and-tested alternative to the US dollar made sense. As it was, in theory, only to be used on military bases so as to prevent the risk of them entering the local economy, the risk of MPCs falling into enemy hands was relatively slim. In practice, however, MPCs still trickled down into the local economies, as merchants would often accept the scrip, with GI's buying the MPCs back at a reduced rate using dollars they had smuggled onto the base. In this way, the GI's were able to get more MPCs than they were issued in a month, and the merchants were able to get access to the ever-coveted US dollars.

1970-73 Military Payment Certificate, Series 692, 50 Cent Replacement Note, front. PMG graded 64 Choice Uncirculated EPQ.

The solution to this problem was that of so called 'C-Days', short for Conversion Days, wherein the military would issue new series of MPCs all at once, rendering the previous series null.

During these C-Days, which often lasted several days, GIs were not allowed to leave the base, and were only able to transfer over set amounts of MPCs at a time, having to request in writing permission to convert an overage beyond the set amount, should they need to convert more than they were allotted.

For soldiers who had attained more MPCs than they were allotted, the risk of being caught trading-in excessive MPCs was often simply too much, resulting in them being unable to profit off their black market dealings.

Furthermore, by using this method, the military was able to get a very good understanding of how many MPCs were unaccounted for from a series and, in turn, how prevalent the black market had been during that period. For example, when the Series 692 was converted out, there was approximately $4.1 million in outstanding MPCs, evidence of a high point in illicit activities.

Though C-Days were an effective means of counteracting black market profiteering in Vietnam, they could only reliably be pulled off once a year or so. To enhance their efforts, a second system was enacted by the US Military Command, one that sought to target the source of illicit dealings: that of the transfer of MPCs to US Dollars and vice versa.

The system, which was known as the Currency and Black Market Control System, or CABOTS for short, operated in a way similar to a credit card. Under CABOTS, anyone authorized to make MPC transactions carried with them a small plastic Currency Control Card, which they had to present whenever completing a transaction. This transaction would be logged by the clerk on duty, notating all important information from the transaction, specifically the who, what, where, when and amount of MPCs exchanged. These forms would, in turn, be passed on to a data center in Saigon, where they would be processed into a larger data system, and show any individual who has made transactions above a certain threshold.

Furthermore, CABOTS provided a means with which to show not just how much black market activity was taking place, but where and how it was happening. For example, shortly after being introduced, CABOTS detected that there were large-scale purchases of money orders and bank drafts taking place, far more than was needed. It was evident that these bank drafts and money orders were the primary means of attaining illicit conversions of MPCs. Thus, the military made it mandatory to mail all money orders and bank drafts, which in turn resulted in a very large drop in the amount of money orders going out.

However, in response to this, the sales of traveler's cheques were seen to suddenly rise, indicating a new medium for conversions. As traveler's cheques were only issued 24 hours prior to departure from the base, and required travel forms proving said departure, the military suddenly became aware of the presence of counterfeit travel orders being produced. More protocols were introduced to counteract this, and illicit conversions once more plummeted.

CABOTS would prove very effective in preventing black market activity, serving as both a deterrent to would-be profiteers, and as a means of capturing those who did exceed those MPC thresholds. Combined with the intermittent C-Days, the military was able to greatly reduce the detrimental effects caused by the presence of a well-established black market.

While the MPC system would not see use after the end of the Vietnam War, a newer form of military scrip in the form of cardboard tokens would see use in Afghanistan and Iraq, though nowhere near on the same scale as MPCs. Nevertheless, the data gathered from using MPCs and other forms of military currency control proved invaluable, providing extensive information on the nature of black market activity during wartime, and the various methods through which currency is illicitly manipulated.


  • Comprehensive Catalog of Military Payment Certificates, Fred Schwan, 2002, pg. 14-25

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