It is in the news that a bank distributed bank notes with dye on them, assumed to be Intelligent banknote neutralisation system (IBNS). It is reported that in one instance this was for mortgage repayments, and the mortgage is now in arrears indicating that the bank did not accept these banknotes for the repayment of debt.

According to google, the definition of legal tender is:

coins or banknotes that must be accepted if offered in payment of a debt.

According to wikipedia, the US is not a country that "allow[s] neutralisation of national banknotes by the National Central Bank" by IBNS.

What is the legal situation here? If one legally comes into possession of bank notes that have apparently been dyed by the IBNS are they legal tender such that if you use them to pay your mortgage they must be accepted?

The jurisdiction here is Atlanta, Georgia, US. The answer for any other jurisdiction that does not explicitly allow neutralisation by the IBNS would be interesting.

  • 1
    I can't speak for the US, but my understanding is that dye packs are designed to mark the banknotes (and often, the robber), not to "invalidate" them as currency. Obviously someone receiving a pack of thoroughly stained banknotes should be on notice of criminal proceeds, and usually a bank would withdraw stained banknotes recovered, but meanwhile they are legal tender and it has to be shown that they are stolen (not just accidentally marked, or accidentally released from a junk pile of withdrawn notes at the bank).
    – Steve
    Apr 4, 2023 at 8:57

1 Answer 1


US law at 31 USC 5103 simply says

United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.

There is no general law requiring a person to accept federal dollar bills in payment for a debt. See this valuable resource about the concept of "legal tender", especially this from the federal reserve:

There is no federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services. Private businesses are free to develop their own policies on whether to accept cash unless there is a state law that says otherwise.

Your bank can legally refuse to accept currency to pay your mortgage, so there is a problem with the initial premise.

If you legally come into possession of such a note, the law does not require you to take a loss, though you may have difficulties getting others to accept the particular bills. The bill can ultimately be exchanged – the usual recommendation is to exchange it at a bank, but one can escalate the matter to the Bureau of Engraving and Printing, which is generally one's recourse with bills that are substantially destroyed.

  • 3
    You're missing an important distinction. Your quote says "There is no federal statute mandating that a private business... must accept currency or coins as payment for goods or services." The linked Fed page says "This statute means that all U.S. money as identified above is a valid and legal offer of payment for debts when tendered to a creditor." A mortgage is a debt. Just read the words on a bill "This note is legal tender for all debts public and private.
    – user71659
    Apr 5, 2023 at 1:26
  • 1
    A car dealership can refuse to sell you a car for cash. But once you drive away with the car not paid in full and owe them money (you have a debt) they must accept legal tender for payment of the debt.
    – gnasher729
    Apr 5, 2023 at 11:15
  • Surely there are ways for the authorities to declare "This piece of paper is no longer a Federal Reserve Note" (shredding it into pieces, stamping it "Cancelled", etc). Could it be argued that dyeing is among those methods? Mar 25 at 2:26
  • @NateEldredge there's no way for someone who has come upon a dyed banknote to know who dyed it. The procedure for removing federal reserve note status from a piece of paper is called "withdrawal from circulation" and requires actually removing the piece of paper from circulation and destroying it so it cannot subsequently be circulated.
    – phoog
    Mar 25 at 16:27

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