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?
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.
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.
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.
In Oregon, You Can Write this Into the Contract
Since you tagged this with oregon:
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.