Q: What is the halachic status of paper currency issued by the government? What happens if the government changes the currency or devalues it?
A: Establishing currency is included in dina d’malchusa. Therefore paper currency issued by the government as legal tender is considered cash, not shtaros (documents), even though it has no inherent value. Therefore oaths and guardianship apply to it; one can betroth a woman with it. Many maintain that it can be used for pidyon haben, even though loan documents cannot; some question this, since this mitzvah is between man and Hashem, whereas dina d’malchusa might be limited to interpersonal matters (Pischei Teshuvah, Y.D. 305:7; Minchas Pittim, C.M. 301:1).
If the government changes the currency or devalues it and establishes laws about payment of former debts from the new currency, the law is valid as dina d’malchusa. There is no concern of theft or ribbis according to most Poskim, even if the resulting payment is more than the initial loan (Rema, Y.D. 165:1; C.M. 74:7; Shach 74:28; Bris Yehudah 21:11).