Since currency substitution is the cause of an increasing in financial susceptibility and restricts the efficiency of national monetary policy.Therefore,it is a significant issue that has drawn worldwide attention.This paper using panel regression methods to investigate the determinants of currency substitution phenomenon by using data collected from38countries around the world for the period2004-2018.Initially,this paper explores the impact of inflation rate,the spread of an interest rate(lending rate less by deposit rate),exchange rate of domestic currency against USD,foreign direct investment inflows along with export value as a percentage of GDP on the level of the substitute currency in all sample countries.Subsequently,the paper investigates the impact of those variables on currency substitution by the level of income so as,a high level of income countries along with middle&low level of income countries.The empirical results represent that in the case of all sample countries,variables such as inflation rate,interest rate spread and trade value including export-import have the statistical significance correlation with the level of currency substitution.While the significant correlation with currency substitution ratio of high-income countries is only interest rate spread.On the contrary,the relation between currency substitution ratio with inflation and export of goods and services are significant in middle&low-income countries.