(8-23-14) After Cyprus and Spain, Portugal is now the next country that is considering capital controls – but it's not that onerous. Capital controls simply means preventing the shipping of money out of the country. It doesn't mean anything more than that.
In Cyprus, for example, the banks didn't simply take the money out of depositors' accounts. What they did is restrict withdrawal. If you had more than 100,000 Euro on deposit, you were essentially frozen in because the government could not finance the banks any further – beyond the ECB 100,000 Euro guarantee. This is very similar to what the FDIC does in the United States.
Countries with some form of capital controls include China, Colombia, Iceland, Cyprus, India, Argentina, Venezuela, Ukraine and Cuba. All of these countries have currencies that are either worthless since the countries are all beat out – or they're currencies that are non-convertible because that’s how the governments in question want them to be.
Capital controls simply means that there is a limit in how much local currency you can convert to US Dollars or any other hard currency and take out of the country.