What is dollarisation? Why some countries use another nation's currency
By SendPay Business · · 2 min read
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- 2Send to the countries you choose
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Dollarisation is when a country uses a foreign currency, usually the US dollar, alongside or instead of its own. Ecuador and El Salvador adopted the dollar as official money in 2000 and 2001, and Panama has used it for more than a century.
Two kinds
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Official dollarisation
the government makes the foreign currency legal tender, sometimes scrapping its own.
Unofficial dollarisation
people choose to save or price things in dollars because they trust them more than the local money.
Why countries do it
It is often a response to very high inflation or a collapsing currency. Using the dollar can bring prices under control quickly and make trade and borrowing cheaper.
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What they give up
The country can no longer set its own interest rates or print money in a crisis. Its economy then follows decisions made by the US Federal Reserve, which are made for the US, not for them.
Where SendPay fits
SendPay platforms let customers hold GBP, EUR and USD and exchange between them at a fee the platform owner sets, powered by licensed partners. SendPay doesn't offer trading.
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Questions people ask
What does a falling currency mean for me?
See the effect on import prices, savings and debts.
Currency devaluation calculator →What is a currency peg?
When a country fixes its currency's value against another currency.
Currency pegs →What is a currency board?
A strict peg where local money is fully backed by a foreign currency.
Currency boards →Read next
Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.