It seems like most countries restrict the citizens to the use of the government currency for exchanging goods.
I'm not a world traveler so maybe there is a country where this is not the case.
Does anyone know of one?
Here are some restrictions on currency in the US that I’m aware of (I’m sure there are more):
- The US Constitution. Article 1, Section 10 states “No state shall....make any Thing but gold and silver Coin a Tender in Payment of Debts”. I’m not sure why market participants can’t decide for themselves what tender to use for debts. Although gold and silver have traditionally been stable currencies, there may be other currencies better suited for different markets, debts, etc.. Why limit people to gold and silver? Ironically, like most of the constitution, this clause is now completely ignored.
- Coinage Act of 1857. This act forbade the use of foreign coins as legal tender, repealing all acts "authorizing the currency of foreign gold or silver coins". This drove foreign currency, which consisted mostly of coins, out of the US since it was no longer legal tender in the US. The US government did not want currency competition.
- FDR orders Americans to hand over their gold to the government in exchange for Federal Reserve Notes. This order made it illegal for Americans to own gold until it was repealed in 1974. Gold is usually the hedge of choice against government issued paper money. Another competitive currency gone.
- Gold Repeal Joint Resolution, approved by Congress in 1933, said that only legal tender can be used for “obligations” (an obligation being anything that requires payment in the US). “Every obligation...shall be discharged upon payment, dollar for dollar, in any coin or currency which at the time of payment is legal tender for public and private debts.” What was the coin or currency that was legal tender? From the resolution: “...coin or currency of the United States, including Federal Reserve notes and circulating notes of Federal Reserve banks and national banking associations.” For 44 years, Americans were only allowed to use US government issued currency for transactions. This was not repealed until 1977.
- Coinage Act of 1965, Section 102 states: “All coins and currencies of the United States (including Federal Reserve notes and circulating notes of Federal Reserve banks and national banking associations), regardless of when coined or issued, shall be legal tender for all debts, public and private, public charges, taxes, duties, and dues.” Only United States currencies (including Federal Reserve Notes) are currently legal tender in the US. An astute reader may note that legal tender only concerns the repayment of debt, taxes, duties, and dues. This is true. But who is going to accept a currency as payment that is not legal tender? The recipient wouldn’t even be able to deposit the currency in a bank since the bank will not want it due to it not being legal tender for debts. The monopoly of the currency is now complete.