- Fiat money is a government-issued currency
- It is not backed by a commodity such as gold.
- Fiat money gives central banks greater control over the economy
- Most modern paper currencies, such as the U.S. dollar, are fiat currencies.
In cryptocurrency, fiat currency is used to refer to government-issued and controlled currencies, which are the opposite of cryptocurrencies. Fiat currencies are not backed by precious commodities like silver or gold, but rather by the government issuing them.
The value of any fiat currency is determined by its demand and supply and the stability of the issuing government. Most modern paper currencies are classified as fiat currencies, including the USD, Euro, Pound, and other major global currencies.
The main factor that sets fiat currencies apart from digital currencies is that fiat currencies are susceptible to inflation.