Fiat currency

Fiat money has no intrinsic value and is not backed by gold or any other commodity. It is accepted because a government declares it legal tender and requires taxes to be paid in it, while a central bank manages its supply. Almost every national currency in use today, including the US dollar, the euro and the yen, is fiat.

In crypto, fiat is the reference point: prices are quoted in dollars or euros, exchanges let users deposit and withdraw it, and most stablecoins are designed to track a fiat currency one to one. Bitcoin was created partly as an alternative to fiat money, with a fixed limit of 21 million coins in contrast to currencies whose supply central banks can expand.

Fiat systems let central banks respond to crises, but the money can lose purchasing power through inflation and, in extreme cases, through hyperinflation, as several countries have experienced. Moving between fiat and crypto usually involves identity checks, fees and, in many countries, tax reporting.