Beyond the United States itself, around 11 countries use the US dollar as their official or main circulating currency, plus several US territories. The reasons split into two groups: small economies that never wanted the cost of running their own currency, and larger economies that dollarized after their own money collapsed.
Dollarized by long-standing choice
- Panama — has used the US dollar (locally called the balboa) since 1904, alongside its own coins. The oldest dollarization.
- Marshall Islands, Federated States of Micronesia, Palau — all use the US dollar under their Compacts of Free Association with the United States.
- British Virgin Islands and Turks and Caicos — British territories that use the US dollar rather than sterling because their economies are tied to the US.
Dollarized after a currency crisis
- Ecuador — abandoned the sucre in 2000 after hyperinflation and a banking collapse. The dollar is now its only legal tender.
- El Salvador — adopted the dollar in 2001 to lower borrowing costs and lock in low inflation. In 2021 it also made Bitcoin legal tender, then rolled much of that back.
- Zimbabwe — abandoned its own dollar in 2009 after inflation reached billions of percent, used a basket of foreign currencies dominated by the US dollar, tried new local currencies, and has repeatedly returned to the US dollar for most transactions.
- Timor-Leste — has used the US dollar since independence in 2002, with its own centavo coins.
Partial and unofficial use
In many more countries the dollar circulates informally alongside the local currency for large purchases, savings and tourism — across much of Latin America, Cambodia (where dollars and riel are used interchangeably), Lebanon during its crisis, and Argentina. Cambodia is the clearest case: roughly 80–90% of deposits are in dollars even though the riel is the official currency.
The trade-off
Dollarization imports the credibility and low inflation of the US Federal Reserve, which is valuable for a country with a history of monetary chaos. The cost is control: a dollarized country cannot set its own interest rates, cannot devalue to boost exports, and earns no revenue from printing money. It also has no lender of last resort in a banking panic.
The euro is the other big case of countries sharing a currency. That guide covers the eurozone and the non-members.
Countries that use the euro →