Seven Countries That Use the US Dollar as Legal Tender

The International Monetary Fund's classification of countries with no separate legal tender identifies seven sovereign states using the US dollar: Ecuador, El Salvador, the Marshall Islands, the Federated States of Micronesia, Palau, Panama and Timor-Leste.

This list is narrower than all places where US notes circulate. Some territories use the dollar, and several countries permit it alongside other currencies. Those arrangements are not the same as having no separate legal tender.

Dollarization does not make every country's cash system identical. Panama issues balboa coins at parity with the dollar, while Timor-Leste issues centavo coins for small transactions. US banknotes serve as the main notes in both systems.

Legal history can also be more complicated than everyday practice. El Salvador adopted the US dollar in 2001. Its colón remains part of the legal framework, but the IMF places the country in the no-separate-legal-tender group. Bitcoin's mandatory acceptance and tax-payment features were removed under reforms agreed in 2025, so it should not be described as equivalent to the dollar's current role.

Using the US dollar can remove exchange-rate uncertainty against the dollar inside the domestic economy, simplify trade and remittances with dollar users, and anchor prices after a period of instability. It can also reduce the risk that domestic money creation will finance government deficits.

The policy is not costless. The country gives up its own exchange rate and much of its independent monetary policy. It also gives up most seigniorage from issuing banknotes and cannot create dollars to respond to a banking panic. Fiscal strength, bank supervision and liquidity arrangements become especially important.

Prices and wages can still rise, and the dollar can strengthen or weaken against the currencies of major trading partners. A dollarized economy can therefore lose competitiveness even though its domestic dollar price appears stable.

Bank fees, payment-system access and shortages of physical notes can also affect daily use. Official dollarization removes one currency conversion inside the country; it does not guarantee low inflation, growth or financial stability.

Check whether a list covers sovereign states, dependencies, official legal tender or widespread informal use. Mixing those categories produces much longer and often misleading lists.

Currency laws change, so consult the relevant central bank or finance authority before relying on a list for travel, contracts or compliance. This page follows the IMF's no-separate-legal-tender classification and explains local qualifications where they matter.