Each day we are reminded of this legal imposition by the familiar phrase stamped on every US dollar bill: “This note is legal tender for all debts, public and private.” Innocuous on the surface, but these words conceal a profound immorality that strikes at the heart of voluntary exchange. If a man of sound mind agrees to settle a contract in X, then he should be obligated to pay X. Forcing him to accept anything other than X as payment is an egregious violation of contractual and property rights.
The state tramples on our natural rights through legal tender laws that grant fiat a privileged status. Contrary to the popular misconception, merchants are not obligated to accept cash. However, the exclusive ability to settle debts, public charges, taxes, and dues bolsters artificial demand, elevating fiat currencies to the preferred medium of exchange in most countries. By privileging fiat above alternatives, the state clears the way for unbacked issuance. When governments can print irredeemable notes, price inflation predictably ensues, turning money itself into a political instrument.
In countries suffering rampant inflation, citizens readily seek out alternative forms of money, whereas those in nations with relatively stable currencies rarely entertain such thoughts. When they do, governments actively discourage alternatives through sales and capital gains taxes. Statist beliefs that money originates from government decree, coupled with the myth that only a single form of money should circulate, further impede adoption. Together, these barriers have solidified the government’s control over money, setting the stage for monopolization.
Friedrich Hayek, in Denationalization of Money, observed that when money is monopolized, it suffers from the “…defects of all monopolies; one must use their product even if it is unsatisfactory, and, above all, it prevents the discovery of better methods of satisfying a need for which a monopolist has no incentive.”
Time and again, paper fiat currencies have proven to be an unequivocal failure as a medium of exchange. Inevitably, they erode over time, disrupting economic calculation and leaving ruin in their wake. Thanks to profligate money printing, public debt across the globe has soared to unprecedented levels, empowering governments to grow untethered.
The roots of the US dollar’s expansion trace back to the War Between the States—a turning point that established the legal tender system and stacked the deck against monetary competition. Over time, the dollar became the world’s reserve currency and bankrolled the US empire—feeding a bloated bureaucracy, funding endless wars abroad, and underwriting an ever-expanding welfare state.
Monetary Tyranny in the US
As the war raged on in the early 1860s, the Union faced a shortage of specie. To sustain the war effort, taxes were raised, new levies imposed, and bonds were sold. Yet, Republicans in Congress argued for more drastic measures. They wanted to sever the dollar’s convertibility to gold and silver. In January 1862, US Representative from Ohio, George Pendleton, warned of the consequences:
It requires no prophet to tell what will be their history. The currency will be expanded; prices will be inflated; fixed values will depreciate; incomes will be diminished; the savings of the poor will vanish; the hoardings of the widow will melt away; bonds, mortgages and notes, everything of fixed value will lose their value.
Later that year, President Abraham Lincoln signed the Legal Tender Act into law, authorizing the printing of $150 million in “greenbacks” to finance the war. By its conclusion, their circulation had swelled to roughly $430 million.
The rapid expansion of greenbacks soon provoked legal challenges, sparking a constitutional struggle over the legal status of money. In 1870, the Supreme Court ruled in Hepburn v. Griswold that Congress lacked the power to make greenbacks legal tender. The majority held that forcing creditors to accept payment deprived them of property without due process. President Ulysses S. Grant expanded the Court later that year by appointing two new justices. The reconstituted Court quickly reversed its earlier decision in Knox v. Lee and Parker v. Davis, declaring legal tender laws constitutional during a national emergency under the Necessary and Proper Clause.
During times of crisis, the size and scope of government tend to expand—a pattern Robert Higgs later described as the “ratchet effect,” where even after retrenching, elements of temporary measures become permanent once the emergency has passed. This effect soon manifested in legal tender laws.
Though the Specie Resumption Act of 1875 established gold redeemability for greenbacks, it did so with partial reserves and without altering the privileged legal tender status of paper fiat. In 1884, Juilliard v. Greenman extended Congress’s authority to peacetime, citing its constitutional power to coin money under Article I, Section 8. This ruling marked the beginning of the end for sound money in the US. Worse still, the Court’s ruling set a dangerous precedent for debasement, opening the door for further monetary manipulation in the decades to follow.
At the height of the Great Depression in 1933, President Franklin D. Roosevelt issued Executive Order 6102. Henceforth, US citizens were prohibited from “hoarding” gold and compelled to surrender their holdings under threat of fines or imprisonment. The following year, the Gold Reserve Act transferred all gold and gold certificates to the US Treasury, consolidating federal control. The dollar remained convertible into gold for foreign central banks until 1971, when President Richard Nixon closed the gold window, cutting the final link between the dollar and sound money.
As Hayek observed, “Though gold is an anchor—and any anchor is better than a money left to the discretion of government—it is a very wobbly anchor.” Without its anchor, the US has accumulated over $38 trillion in debt as of October 2025. In contradiction to its founding principles, legal tender laws have paved the way for the country’s radical reshaping.
Denationalization of Money
Repealing legal tender laws would allow open competition among different forms of money. Naturally, competition would favor monies capable of maintaining their purchasing power and, over time, the most desirable would exhibit portability, durability, divisibility, fungibility, recognizability, and scarcity. As Hayek argued, unreliable and unstable monies would eventually die off. In this competitive landscape, fiat would contend with precious metals, cryptocurrencies, and other commodities.
This competitive dynamic is far from theoretical. The cryptocurrency landscape offers a clear illustration of how such a system could operate. As of November 2025, CoinMarketCap tracks millions of crypto-assets. While not all are intended to serve as money, they do differ in liquidity, degrees of centralization, consensus mechanisms, monetary policies, and underlying technologies.
Among these, Bitcoin (BTC) has established itself as a decentralized, censorship-resistant alternative that has functioned as an inflation hedge. Privacy-focused coins—such as Monero (XMR) and Zcash (ZEC)—are preferred by individuals who prioritize anonymous transactions. Ethereum (ETH) and Solana (SOL) serve as programmable money, offering built-in smart contract functionality. A variety of stablecoins also exist, ranging from fiat-pegged to commodity-backed to algorithmic, each catering to users with different preferences and priorities.
By genuinely leveling the playing field, individuals could freely opt out of using depreciating Federal Reserve notes. Facing the risk of displacement, governments would be compelled to exercise at least minimal fiscal responsibility. Among competing mediums of exchange, each individual’s choice would reflect dynamic rankings based on subjective value. Those who wish to continue using fiat could do so. Ultimately, the medium of exchange that prevails would be determined by voluntary market interactions.
Conclusion
Supreme Court Justice Stephen Johnson Field, who served from 1863 to 1897, was a steadfast opponent of legal tender laws, consistently arguing that they violated the spirit of the Constitution and the principles of limited government. In Dooley v. Smith (1871), he wrote:
We are therefore compelled by every consideration of duty which may be supposed to govern judicial officers on this bench to express on all proper occasions our dissent from what we regard as a wide departure from the limitations of the Constitution. Those limitations must be preserved or our government will inevitably drift from the system established by our fathers into a vast centralized and consolidated government.
A century and a half later, Justice Field’s warning has fully come to fruition. At the expense of our civil liberties, the government has continued to consolidate power, cementing its control over the monetary system. Beneath the surface, legal tender laws continue to gnaw at the foundation, underscoring the need to abolish them and allow for free competition.
In an open market for money, the moral and economic bankruptcy of the state would be exposed. Throughout history, precious metals have served as sound money; today, open-source, decentralized blockchains offer possibilities of a digital alternative. Whatever its form, sound money would emerge. By protecting purchasing power and reestablishing economic freedom, it would lay the cornerstone for a prosperous society—and finally free us from the monetary chains forged by the State.
