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If I understand correctly, any debt in the US can be paid in paper US dollars. If the denomination of the debt is Bitcoin, gallons of gasoline, ounces of gold, pallets of smartphones, or anything else, it can be paid with the fair market value of the items in paper money. How does this work if the debt has no clear monetary value? If I create a cryptocurrency (ABCcoin) and my friend creates another (XYZcoin), I mine some ABC and he mines some XYZ, and we sign a contract to trade 50 ABC for 100 XYZ, that is the only transaction involving the currencies, so it sets the market value at 1 XYZ = 2 ABC. However, neither currency has a value in US dollars. What if I decide I want to keep my ABCcoin and pay my friend in US dollars instead? How would the value of ABCcoin in dollars be determined with no market to determine a market value?

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    I'm not so sure that you understand correctly. As I understand it, a debt is a contract to deliver some specified property to the lender on a certain date, in exchange for having received some other valuable consideration. It is only fulfilled by delivering the exact property that the contract specifies. If the lender suffers damages as a result of you delivering dollars instead of gasoline, you will be liable for those damages. Jul 27 at 18:39
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    You might be thinking of the idea of legal tender, which is that a debt denominated in dollars can be satisfied by delivering Federal Reserve Notes, as opposed to a check or wire transfer or what have you. Jul 27 at 18:44
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    You signed a contract to trade in ABC and XYZ coins. What gives you the right to change to contract to pay is US dollars? This sounds like a barter agreement exchanging assets rather than currency.
    – doneal24
    Jul 27 at 18:49
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    So "this note is legal tender for all debts, public and private" doesn't actually mean "all debts"?
    – Someone
    Jul 27 at 18:50
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    @Someone Contractually, you have an established an obligation, but not necessarily a debt. Jul 28 at 13:27

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I think that you are distorting the legal situation by describing it as a debt denominated in XYZcoins. According to the LII page "Debt":

Debt is a financial liability or obligation owed by one person, the debtor, to another, the creditor.

Note that a debt is a financial liability. That means that it is payable in money, in some recognized currency. In the XYZcoin case, there is not a debt, but a contract of exchange. It can only be satisfied by handing over the cryptocurrency specified in the agreement, unless the parties agree to change that.

When a person signs a contract to sell a house, for example, that person does not owe a debt denominated in houses. Rather, that person has agreed to deed over a specific house on specific terms. If the seller refuses to close the deal and the would-be buyer brings a legal action, the judge may order specific performance, that is, order the seller to sign the papers needed to transfer title to that specific house. A similar remedy may be available on a contract to sell a painting or other object that is unique, and cannot be replaced easily by a different object of the same type. Something similar may occur with a contract to sell or trade stocks not listed on any exchange, where there is no clear market value, and the purchaser wants shares in that particular company, not a sum of money.

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    Okay, that makes sense. So legal tender means my friend can't insist on being paid in ABCcoin if I owe him dollars, not that I can insist on paying dollars if I owe him ABCcoin?
    – Someone
    Jul 27 at 22:04
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    @Someone: Those are both just a consequence of "a contract is a contract"; neither party can insist on something that isn't in the contract. If it says you will deliver asset X, that's what you do. It has nothing to do with legal tender. Legal tender is about the means by which the payment is made, not the type of asset. If you owe your friend dollars, legal tender says you can pay those dollars in the form of Federal Reserve Notes, even if your friend would rather have a (US dollar-denominated) check. Jul 28 at 6:01
  • Ah, but what happens if specific performance isn't possible, for example because the person who owes the cryptocurrency has lost the private key needed to transfer it? Presumably the court can award damages in the local currency, but how will the court determine the value of the damages? I feel like this is what the OP was trying to get at.
    – Brian
    Jul 29 at 0:24
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    In a case like that the plaintiff would have to present evidence to establish the amount by which s/he has been damaged. The defense could present countervailing evidence. The trier of fact would need to determine the amount of damages, taking all such evidence into account, just .as they would if a painting had been sold, but destroyed in a fire before delivery. Jul 29 at 0:39
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The court decides

First off, this isn’t a debt, it’s a breach of contract that may lead to a debt once a court rules on it.

You broke your contract to provide 50 ABC (or a car, or 10 heads of lettuce, doesn’t matter). This gives the plaintiff the right to sue to be put in the same position as they would have been in if you hadn’t broken the promise.

The court might order specific performance, that is, they will make an order that you transfer the 50 ABC.

More likely, the court will order the payment of damages. The onus is on the plaintiff to prove what damage they suffered by not having 50 ABC. For example, they might produce evidence that they had a buyer who was willing to pay them $10,000 for 50 ABC, if so, the damages are $10,000. If they can’t prove that 50 ABC has any value, then they get nominal damages - $1.

Courts have a very strong preference for damages rather than specific performance. Specific performance is usually only ordered when damages cannot restore the innocent party, typically where the item is unique - a piece of art, a vintage car, a piece of land etc. and money is not a substitute.

Courts prefer the efficient breach theory of contract rather than the more moralistic “contract as promise”. That is, a contract is an economic commitment rather than an ethical one - if it serves a party’s interest to break the contract and pay damages, they should be allowed to do so.

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  • Why do you say that compensatory damages are more likely than specific performance? To my mind the latter seems much more straightforward from the court's perspective.
    – Michael
    Jul 27 at 23:22
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    @Michael: Specific performance is disfavored because it is more coercive than simple payment of damages. The defendant might be forced to undertake all sorts of complicated business ventures, and if they don't actually want to do that due to changed circumstances, this could result in economic waste. However, the court must also consider whether damages will fully compensate the plaintiff for the breach.
    – Kevin
    Jul 28 at 7:03
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    @Michael the law prefers damages rather than specific performance for economic efficiency reasons. If a person wants to break a contract and recompense the innocent party rather than completing the contract, they should be able to do so.
    – Dale M
    Jul 28 at 9:06
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What if I decide I want to keep my ABCcoin and pay my friend in US dollars instead? How would the value of ABCcoin in dollars be determined with no market to determine a market value?e

A court might very well order specific performance of the contract, rather than reducing the debt to a dollar value, in a such a case.

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In Oregon, You Can Write this Into the Contract

Since you tagged this with :

ORS 72.3040 states that the contract can make a price “payable in money, goods, realty or otherwise.”

The price can be made payable in money or otherwise. If it is payable in whole or in part in goods each party is a seller of the goods which the party is to transfer.

You Can Sometimes Pay in Dollars at Today’s Exchange Rate

If there is a written promise to pay an amount denominated in foreign currency, ORS 73.0107 provides:

Unless the instrument otherwise provides, an instrument that states the amount payable in foreign money may be paid in the foreign money or in an equivalent amount in dollars calculated by using the current bank-offered spot rate at the place of payment for the purchase of dollars on the day on which the instrument is paid.

Where “instrument” is defined in ORS 73.0104.

The term “foreign money” is not defined, and I am not aware of any relevant legal precedent, but I do note that at least one country recognized by the US, Ecuador, has made a cryptocurrency legal tender.

Other Laws Might Apply

You would also want to make sure the contract does not violate any other law, such as a prohibited “commodity contract” under ORS 645, or a campaign contribution in cryptocurrency under ORS 260.011.

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