Ever walked into a shop in Quito, Ecuador, and realized you didn't need to visit a currency exchange? It’s a bit of a trip. You’re thousands of miles from Wall Street, yet the crisp five-dollar bill in your pocket works exactly the same as it does in Jersey.
Honestly, the list of places that have gone all-in on the "greenback" is longer than most people realize. We aren't just talking about American territories like Puerto Rico or Guam. We’re talking about sovereign nations that looked at their own volatile economies and basically said, "You know what? Let's just use the U.S. dollar instead." It's a process economists call dollarization, and while it sounds like a boring textbook term, it’s usually born out of absolute chaos.
The Nations That Went All-In
When a country officially adopts a foreign currency, they lose a lot. They can't print money. They can't set their own interest rates. So why do it? Usually, it's because their original currency became about as valuable as monopoly money.
Ecuador: The Survival Choice
Back in 2000, Ecuador was in a tailspin. Hyperinflation was eating people’s savings alive. The Sucre—their old currency—was crashing so hard that the government made a radical move. They killed it. They replaced it with the U.S. dollar. Today, if you visit, you’ll see American bills everywhere, though they still mint their own "centavo" coins for small change. They’ve stayed with it for over two decades because it brought a level of price stability that the Sucre never could.
El Salvador: The Dual-Currency Pioneer
El Salvador joined the club in 2001. More recently, they made waves by also adopting Bitcoin as legal tender, but the dollar currency remains the backbone of their daily trade. For a country with a massive diaspora sending money home from the States, using the same currency just makes life easier. No exchange fees. No math. Just $20 being $20.
Panama: The Century-Old Partner
Panama is the "old guard" of this group. They’ve been using the U.S. dollar alongside their own Balboa since 1904. It’s pretty much a result of the Panama Canal's history and the deep-seated ties with the U.S. military presence there for nearly a century. If you go there today, you'll see Balboa coins, but the paper money is 100% American.
The "Unofficial" Dollar Club
Then you have the countries where the dollar isn't technically the "only" legal tender, but everyone treats it like it is. It's the "under-the-table" king.
In Zimbabwe, the story is legendary. After the local dollar hit inflation rates that reached trillions of percent, the government gave up. They now use a mix of currencies, but the U.S. dollar is the one everyone actually wants. If you’re buying a soda or paying rent in Harare, you’re likely reaching for George Washington.
Cambodia is another fascinating case. While they have the Riel, about 80% to 90% of the economy runs on USD. You’ll get your change back in a mix of both. It’s a weirdly seamless system once you get used to it.
Here’s a quick look at where the dollar is the official (or semi-official) boss:
- Turks and Caicos: A British territory that decided the dollar was better for tourism.
- British Virgin Islands: Same deal—it keeps the financial services sector humming.
- Timor-Leste: Adopted it in 2000 to stabilize after gaining independence.
- Micronesia, Palau, and the Marshall Islands: They use it through "Compacts of Free Association" with the U.S.
Is It Actually a Good Idea?
It’s a trade-off. A massive one.
When a country adopts the dollar currency, they gain credibility. Investors feel safer putting money into a country where the value of that money won't vanish overnight. It kills the risk of a "currency crash." But the downside is a loss of "Seigniorage"—that’s the profit a government makes by minting its own money. More importantly, they become passengers on the Federal Reserve’s bus. If the Fed raises interest rates in D.C., a small business owner in El Salvador feels the squeeze, even if their local economy doesn't need a rate hike.
It's sorta like moving into a house where you don't own the thermostat. It might be a much nicer house than your old one, but you can’t complain when it’s too cold.
What Most People Get Wrong
A common misconception is that these countries are "owned" by the U.S. or that the U.S. sends them shipments of cash for free.
Neither is true.
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These nations have to "buy" their dollars by selling goods or services to the world. They have to maintain a trade surplus or attract foreign investment to keep enough cash in the system. If they run out of dollars, they can't just print more. That’s why you’ll sometimes see "liquidity crises" in dollarized zones—there's literally not enough physical paper in the ATMs.
Practical Takeaways for Travelers and Businesses
If you're heading to a dollarized country, keep these things in mind:
- Check the Coins: Many places, like Ecuador and Panama, use U.S. bills but their own coins. Don't try to use those coins back in the States; your local vending machine will spit them out.
- Condition Matters: In places like Cambodia or Vietnam (where it's unofficially used), bills must be pristine. A tiny tear or a bit of ink can make a $100 bill worthless to a local vendor.
- The "Two-Currency" Shuffle: Always carry small denominations. If you pay for a $2 coffee with a $20 bill in a place like Zimbabwe or Cambodia, you're going to get a handful of local currency back as change.
Knowing which countries use the dollar is more than just a trivia fact; it's a window into how global power and economic desperation collide. Whether it's to escape the ghosts of hyperinflation or to lure in tourists, the dollar remains the world's favorite safety net.
Before your next trip or international business deal, verify the current legal tender status on the official treasury or central bank website of the destination country, as currency laws can shift—just look at Zimbabwe's multiple attempts to relaunch a local coin.