Are you required to use dollars for all transactions in the United States? Sometimes, I receive submissions from columnists that suggest or even outright assert that it is illegal to use currencies other than the US dollar in the United States. This is not the case. Federal legal tender laws — by themselves — do not outlaw the use of foreign currencies in trade, nor does it make the use of the US dollar mandatory. Federal law does make the US dollar (namely, Federal Reserve notes) the preferred currency via government edict. So, dollars are legal tender, and some US bullion coins are legal tender also, although you'd be insane to use a $20 dollar US gold piece to buy something worth 20 modern US dollars. Clearly, this puts the US dollar at a big advantage, but this is something different from federal law mandating that you use dollars.
For example, if I sell you a car and tell you'd I'd accept Swiss francs or Mexican pesos for the car, I am legally free to do so. Of, if you are my employee and say you will accept some other currency, that is fine too.
However, once the transactions become more sophisticated than that, you'll find that it's very difficult to use something other than dollars. Ordinary people will find it nearly impossible to open bank accounts or get debit/credit cards denominated in anything other than dollars.
So, practically speaking, it is extremely impractical to use something other than the dollar in the US. Any other currency must — in the vast majority of cases — be converted to dollars before you can bank with it.
But this is independent of the legal tender issue. As Finbar Feehan-Fittzgerald noted in this article, Zimbabwe has declared nine currencies to be legal tender. Declaring something to be legal tender does not mandate its use, though.
In the US, the dollar enjoys legal tender status, favoritism within federal banking and financial regulations, and huge network effects that, in everyday life, clearly make use of the dollar still preferable to other currencies at this time.
Strictly speaking, though, the federal government has not banned the use of other currencies. It just makes the use of other currencies very, very impractical.
