Have you heard the term fiat money, but don’t know what fiat money is? Then this article is dedicated to you. In the lines below I will explain what the term fiat currencies refers to, how they are different from cryptocurrencies and how they work in the global economy. If you want to buy cryptocurrencies you can easily do it with a simple click.
What is fiat money?
fi fiat currencies (also called fiat money) are those forms of money that have no intrinsic value and are not backed by physical assets such as gold or silver. Their value derives solely from the confidence that people and governments have in them. Basically, they are accepted as a medium of exchange only because the authorities have declared them legal and because society trusts that they can be used for transactions.
Example of fiat currencies
All the modern currencies we use every day are fiat currencies, including:
- Romanian Leu (RON)
- Euro (EUR)
- US Dollar (USD)
- Pound sterling (GBP)
- Japanese Yen (JPY)
These currencies are not backed by gold or other physical assets, but by the economic policies of central banks and public confidence in the financial system.
How do fiat currencies work?
Central banks, such as the National Bank of Romania or the US Federal Reserve, are responsible for issuing fiat money and controlling the money supply. They regulate the amount of money in circulation to maintain economic stability by preventing excessive inflation or deflation.
Trust currencies are used for shopping, saving and investing, with the advantage that they can be easily transported and exchanged. However, unlike cryptocurrencies or gold-backed money, they are vulnerable to inflation and government decisions.
To remember!
Trust currencies are the bedrock of the modern economy, and their value depends on the confidence of users and the economic policies of governments. Although they are the most common medium of exchange, they come with risks such as inflation and devaluation. Today, more and more digital alternatives are emerging, such as cryptocurrencies, which offer a different perspective on the future of finance.