{"id":731191,"date":"2018-02-15T16:18:15","date_gmt":"2018-02-15T05:18:15","guid":{"rendered":"https:\/\/www.finder.com\/ca\/?p=731191"},"modified":"2026-08-04T16:14:42","modified_gmt":"2026-08-04T20:14:42","slug":"what-is-fiat-currency","status":"publish","type":"post","link":"https:\/\/www.finder.com\/ca\/cryptocurrency\/coins\/what-is-fiat-currency","title":{"rendered":"What is fiat currency?"},"content":{"rendered":"

With all of the different types of cryptocurrency and terms floating around, the world of cryptocurrency can be easy to get lost in. One of the terms that pops up quite frequently is fiat currency \u2014 but what are people talking about when they use this term?<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n

\nThis is not an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade or use any services.\n<\/p><\/div>\n\n

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Key takeaways<\/h3>\n <\/div>\n\n
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  • Fiat currency is government-issued money that isn\u2019t backed by a physical asset like gold. Instead, its value comes from the public accepting it as a legal tender.<\/li>\n
  • In Canada, the Bank of Canada helps manage the supply of fiat money to support economic stability and keep inflation low and predictable.<\/li>\n
  • Unlike fiat currency, cryptocurrencies are digital assets that aren\u2019t controlled by governments and get their value from supply and demand.<\/li>\n <\/ul>\n\n \n <\/div>\n

    What is fiat currency?<\/h3>

    Fiat currency is a form of money that\u2019s issued by a government and declared to be legal tender. This type of currency is not linked to any asset of value and can be printed at will by central governments. However, governments must be careful to avoid over-circulation, as this would cause a drop in value.<\/p>

    What determines the value of fiat money?<\/h3>

    The value of the currency is based on what it can be used for, not because the coins or cash have any particular value. It\u2019s money that can be used because it\u2019s based on a trust relationship between the issuer, the holder and those that receive it \u2014 in turn, the supply and demand can be loosely regulated by the government and market.<\/p>

    If trust in the value of a currency is lost, it will lose demand which will lead to a drop in value. The trust of currency is ultimately based on members of the economy believing it\u2019s worth something. The value of fiat money isn\u2019t directly held in a physical asset like a precious metal or an item that\u2019s of use to someone.<\/p>

    For example, when the government of Zimbabwe started issuing more money, the situation eventually snowballed into one where no-one trusted the value of the currency \u2014 so, it collapsed as a form of fiat currency.<\/p>\n\n\n

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