Concept and Definition of the Dollar
The term “dollar” refers to a unit of currency that is used as legal tender in several countries. The name originally comes from the silver Joachimsthaler, a 16th-century coin whose name was adopted into English as “dollar.” Today, the US dollar (ISO code: USD) is the most significant and widely used dollar currency worldwide, followed by other types such as the Canadian dollar (CAD), Australian dollar (AUD), New Zealand dollar (NZD), and others.
Legal Foundations of the Dollar
Legal Tender
The dollar serves as legal tender in various countries. This means that the acceptance of the dollar for settling debts is generally mandatory, unless there are opposing agreements or statutory exceptions. In the United States, for example, the status of the US dollar as legal tender is established in the Coinage Act of 1965 and its supplementary regulations.
United States Dollar (USD)
According to Article I, Section 8 of the Constitution of the United States of America, the US Congress holds the exclusive power to regulate the US dollar as legal tender. The issuance of coins and banknotes is the responsibility of the United States Department of the Treasury—specifically the Bureau of Engraving and Printing for banknotes and the United States Mint for coins. Congress has granted the Federal Reserve System, the central bank of the United States, the authority to issue Federal Reserve Notes, which are legal tender.
Dollar in Other Countries
Other countries, such as Canada or Australia, also regulate the status of the dollar by acts of parliament, such as the “Currency Act” in Canada or the “Currency Act” in Australia. The respective central banks are authorized to issue dollar-denominated currencies that serve as mandatory means of payment in legal transactions.
Dollar in International Legal Relations
The dollar plays a significant role in international economic law. Many international contracts, especially in the areas of trade and investment, contain agreements designating the dollar as the contract currency (currency of account). The dollar also functions as a global reserve currency; numerous countries hold dollar notes and deposits as part of their foreign currency reserves.
Choice of Law and Jurisdiction
In international contracts, the dollar can be explicitly specified as the currency. This has legal effects, for example, on exchange rates, place of performance, and enforceability of claims in the event of exchange rate fluctuations. To ensure contract fulfillment, mechanisms for adjustment in case of significant value fluctuations are often established.
Protection and Abuse of the Dollar
Criminal Offenses
The protection of the dollar currency is safeguarded by criminal law. In the United States, for example, Title 18 of the United States Code (§ 471 ff.) and other federal laws regulate the punishment of offenses such as counterfeiting, distribution of counterfeit money, and money laundering involving the dollar. Money laundering laws also require financial institutions to report suspicious dollar transactions to prevent abuse.
Sanctions Law
Due to its role in international payments, the dollar is often subject to sanctions. The US government can, based on national and international sanctions legislation, deny certain individuals or legal entities access to the US dollar system (e.g., exclusion from SWIFT or restriction of correspondent banking relationships), which can have far-reaching legal consequences for affected companies and countries.
Dollar and Payment Law
Transfer and Possession
Like other currencies, the dollar can be held and transferred in the form of cash or as book money. Different legal regulations apply in each country for acquiring ownership and bona fide acquisition of dollar banknotes. Banknotes and coins can be transferred by transfer of ownership, with respective national rules on good faith and property protection applying.
Dollar in Electronic Payments
With digital transformation, the dollar is increasingly being used in electronic form as well. Legally, regulations on identification, reporting obligations, and regulatory requirements for payments must be observed. The relevant provisions for payment protection and data protection also apply to transactions on electronic platforms.
Special Issues and Current Developments
Dollar as Parallel Currency and “Dollarization”
In a number of countries (e.g., El Salvador, Zimbabwe), the US dollar is either the official currency (official dollarization) or is used as a parallel currency, often unofficially, in payment transactions (informal dollarization). There are extensive country-specific legal regulations regarding this, ranging from complete adoption of American monetary policy to different mixed forms.
Legal Issues with Cryptocurrencies and Stablecoins
The development of stablecoins, which are often pegged to the value of the US dollar (e.g., Tether, USDC), raises new legal questions. The legal classification of such electronic dollar equivalents varies internationally and is subject to regulatory developments, with particular focus on consumer protection, money laundering prevention, and system stability.
Summary
The dollar is a central concept in national and international monetary and contract law. Its significance extends to a wide range of legal issues, from the fundamentals of its status as legal tender, to its protection against abuse, its role in international contractual relations, and current developments surrounding digitalization and cryptocurrencies. The legal treatment of the dollar is always dependent on applicable national and international laws, as well as ongoing developments in financial and payment law.
Frequently Asked Questions
Is trading in US dollars legally permitted in Germany?
Trading in US dollars is generally permitted in Germany. The US dollar is an internationally recognized foreign currency and is frequently used in international trade, investments, or as a reserve currency. German banks, currency exchange offices, and online platforms are authorized to trade US dollars as long as they comply with the relevant banking and financial regulations. These include, in particular, the Banking Act (KWG), the Money Laundering Act (GwG), and compliance with reporting requirements under the Foreign Trade and Payments Regulation (AWV), provided transactions exceed certain thresholds. Private individuals and companies can legally acquire, own, and use US dollars as long as all applicable legal requirements are observed.
Are there restrictions on owning or transporting large amounts of US dollars?
There are no quantitative restrictions on owning US dollars in Germany. However, specific reporting and documentation obligations apply when cash, regardless of currency, amounting to 10,000 euros or more (or the equivalent in US dollars), is transported across national borders. In this case, EU Regulation (EC) No 1889/2005 requires open declaration to customs authorities. Additionally, such transactions are subject to increased money laundering controls. Banks and financial service providers are obligated to verify the origin of funds for unusually large amounts and report suspicious activities to the Financial Intelligence Unit (FIU).
What legal framework applies to dollar exchange in Germany?
When exchanging euros for US dollars and vice versa, financial institutions and currency exchange offices must comply with the provisions of the Money Laundering Act (GwG). Depending on the amount, customers must provide identification and proof of the origin of the funds. For commercial exchange transactions, a license pursuant to § 32 KWG is also required. Currency exchange offices are subject to the supervision of the Federal Financial Supervisory Authority (BaFin). Furthermore, for money transfers across borders, reporting requirements under the AWV must be observed, especially when payments are made to or from outside the European Economic Area.
Are US dollar accounts at German banks legally permitted?
German banks can offer foreign currency accounts, such as US dollar accounts; it is at the discretion of the respective bank. There are no legal prohibitions against US dollar accounts for private or business customers. However, all provisions for money laundering prevention and tax obligations, especially regarding interest earnings generated in US dollar accounts, apply here as well. In addition, reporting obligations apply when foreign tax authorities request information about accounts held by German citizens, particularly under international agreements on tax transparency (e.g., FATCA for US ties).
Can contracts in Germany legally be denominated in US dollars?
Contractual partners are generally free to agree on the currency in which a contract is denominated, including the US dollar. This freedom of currency choice is part of private autonomy and is regulated in the German Civil Code (BGB). There is no requirement that contracts must be concluded in euros unless special legal provisions (e.g., for public service or official fees) dictate otherwise. The fulfillment of payment obligations in US dollars, however, is subject to conversion at the current exchange rate if a statutory or contractual conversion clause has been agreed.
What reporting obligations apply to dollar transactions in international payments?
For dollar transactions that exceed certain thresholds—currently 12,500 euros or the equivalent in US dollars per payment—there is a reporting obligation to the Deutsche Bundesbank under § 67 ff. of the Foreign Trade and Payments Regulation (AWV). Both the receiving and paying parties must report cross-border payments unless exempted under the AWV. This reporting obligation serves the statistical recording of payment transactions and the monitoring of international capital flows. Failure to comply with the reporting requirement can be classified as an administrative offense and penalized with a fine.
What tax obligations arise when holding or exchanging US dollars?
Profits from the sale of foreign currencies such as the US dollar are subject to capital gains tax in Germany when realized as part of private sales transactions within the speculation period (one year). Interest earned on US dollar accounts is also taxable as investment income and must be declared in the tax return. For business activities, such profits are treated as business income. Tax treatment is governed by the Income Tax Act (EStG) and applies to both individuals and companies. Regarding withholding tax in the international context, double taxation agreements may apply.
