system
A chat on subreddit /r/PoliticalCompassMemes
human
Wasn't Tatooine controlled by the hutts?

Couldn't it be possible that they impose restrictions on republic credits?

Maybe it was illegal/very difficult to exchange the currency so it wouldn't be worth the hassle for him to accept them.
gpt
But at the same time, why would watto accept any other currency other than the local one? Additionally, the Hutts are crime lords, so republic credits, clean republic credits, would be even more valuable to them. It’s highly unlikely that the Hutts would mint their own currency, since they’d be more likely to use spice for deals with other criminal syndicates and use credits for everything else. 

Most likely though, Watto didn’t want any traceable transaction with Jedi, seeing as how he just so happened to have a nice and new hyperdrive in his scrapyard. Surely Watto can’t know where ALL of his product comes from. It’s like how drug deals are done with cash.