There's no doubt that the U.S. dollar has immense power. Its value is determined by the strength of the American economy, which is one of the reasons why it's the world's dominant currency. Not only is it the world's most commonly used currency, but it's also the world's reserve currency, meaning it's held in large quantities by central banks around the globe. Commonly known as the greenback, it's also one of the most commonly traded currencies on the foreign exchange market.

While it's strength as a powerhouse may not be a shock, it may come as a surprise that the dollar is also the official currency of a host of U.S. territories and other sovereign nations around the world. It's also the quasi-official currency of many other nations that commonly accept U.S. dollars in addition to their own local currency. If you're an avid traveler, someone who does business overseas, or an ex-pat, you'll want to keep reading. We've compiled a comprehensive list of places around the world that use the greenback as an official currency.

Key Takeaways

  • Five U.S. territories and seven sovereign nations use the U.S. dollar as their official currency.
  • The British Virgin Islands and the British Turks and Caicos Islands also use the U.S. dollar as their official currency of exchange.
  • The U.S. dollar is also used in conjunction with local currencies in a number of different popular destinations for American tourists.

Official Use of the U.S. Dollar

The world's first U.S. dollar was printed in 1914 after the Federal Reserve Bank was created. It became the world's reserve currency after the negotiation of the Bretton Woods Agreement in 1944 when it was decided that the world's central banks would use fixed exchange rates between the U.S. dollar and their own currencies.

According to the Federal Reserve Bank of New York, more than half of the U.S. dollars printed are used outside the United States—as much as 65%—to the tune of $580 billion, with the majority being exchanged in countries in Latin America and the former Soviet Union.

More than 65 countries peg their currencies to the U.S. dollar while five U.S. territories and seven sovereign countries use it as their official currency of exchange. The table below provides an overview of the U.S. territories and independent sovereign nations that use the U.S. dollar as their official medium of exchange.

 

U.S. Territory or Foreign Country

 

Relationship with United States

 

Geographic Location

 

Population (2018)

 

Gross Domestic Product  (2018)

 

United States of America

 

Federal Republic

 

North America

 

         318,636,000 

 

 $20.5 Trillion 

 

Commonwealth of Puerto Rico

 

Unincorporated territory of the U.S.

 

Northeastern Caribbean

 

              3,195,150 

 

 $103.1 Billion 

 

Ecuador

 

Independent country

 

Northwestern South America

 

           17,084,360 

 

 $108.4 Billion 

 

Republic of El Salvador

 

Independent country

 

Central America

 

              6,420,740 

 

 $26.1 Billion 

 

Republic of Zimbabwe

 

Independent country

 

Southeast Africa

 

           14,439,020 

 

 $31.0 Billion 

 

Guam

 

Unincorporated territory of the U.S.

 

Western Pacific Ocean

 

                 165,770 

 

 $5.9 Billion 

 

Virgin Islands of the United States

 

Insular area territory of the U.S.

 

Caribbean

 

                 106,980 

 

 $3.9 Billion 

 

Democratic Republic of Timor-Leste

 

Independent country

 

Maritime Southeast Asia

 

              1,267,970 

 

 $2.6 Billion 

 

American Samoa

 

Unincorporated territory of the U.S.

 

South Pacific Ocean

 

                    55,470 

 

 $711 Million 

 

Commonwealth of the Northern Mariana Islands

 

Unincorporated territory of the U.S.

 

Western Pacific Ocean

 

                    56,880 

 

 $636 Million 

 

Federated States of Micronesia

 

Six Sovereign Countries

 

Subregion of Oceania

 

                 112,640 

 

 $401.9 Million 

 

Republic of Palau

 

Island Country

 

Western Pacific Ocean

 

                    17,910 

 

 $284 Million 

 

Marshall Islands

 

Island Country

 

Near Equator in the Pacific Ocean

 

                    58,410 

 

 $221.3 Million 

Source: The World Bank

The British Virgin Islands and the British Turks and Caicos Islands also use the U.S. dollar as their official currency of exchange.

The British Virgin Islands and Turks and Caicos adopted the U.S. dollar as their official currency because of their close relationship with the United States.

Quasi-Use of the U.S. Dollar

The U.S. dollar is also widely used throughout the world as a quasi-currency of exchange. While it should be no surprise that the U.S. dollar is widely accepted for commerce in both Canada and Mexico, the U.S. dollar is also accepted in a host of tourist destinations including the Bahamas, Barbados, Bermuda, the Cayman Islands, Sint Maarten, St Kitts and Nevis, the ABC Islands of Aruba, Bonaire, Curacao, and the BES Islands including Bonaire, Sint Eustatius, and Saba—now collectively known as the Caribbean Netherlands.

The U.S. dollar is also used as a quasi-currency in a variety of popular U.S. retirement destinations such as Belize and Panama, and in some areas of Costa Rica. The greenback is also widely accepted in Nicaragua. People in the U.S. military can likely attest that the U.S. dollar is gaining widespread popularity throughout the Philippines.

For the truly adventurous traveler, the acceptance of the greenback can be tested in countries such as Myanmar, Cambodia, Liberia, major cities in Vietnam, and the Old City of Jerusalem.

The Bottom Line

The U.S. dollar is the most widely used currency in the world because of its stability. Barring some unforeseen catastrophe, the U.S. dollar will likely remain the global currency of choice until such a futuristic time when a global digital money system is invented and accepted. People planning on using the U.S. dollar outside the United States should notify their banking and credit card companies as a precaution from having their accounts frozen due to suspicious overseas activities. Consumers should also reach out to their bank and credit cards to clarify any foreign currency transaction fees.