While the previous tradition of substituting bank notes for hard currency played a role, coercive laws enforcing the acceptance of fiat currency for the payment of debts, as well as the acceptance of the fiat currency as payment of taxes, are the two largest factors for the persistence of fiat currency acceptance. Then of course, there are the regulations that prevent/restrict other currencies from "competing" with the fiat currency; as occurred with the "Liberty Dollar" http://en.wikipedia.org/wiki/Liberty_Dollar
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