[SES1066]

You get a credit on your U.S. tax return for the taxes you paid in the foreign country ...

True only if there is a tax treaty between the two governments and then the deducted amount is still subject to limitations in actual use. Add to this the severe actual consequences of being unable to use local banking due to IRS regulatory burdens upon those institutions and you end up with real disincentives.

[Alberta's Child]

My understanding is that local banking concerns are only an issue when you're dealing with a large sum of money, with brokerage accounts, or both.

I also wonder if a U.S. citizen who conducts business with a foreign bank using only the currency of that nation has the same problem.