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 its 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 eight 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.

Countries Where the U.S. Dollar is Legal Tender
 
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 
Panama Independent Country Central America 4,177,000 $65.1 Billion
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. In Panama, for instance, the U.S> dollar is legal tender alongside the national currency, the Balboa, which is also worth USD $1. 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.