Fiat currency: what is it?

The cash has existed for millennia and has always been used to facilitate transactions between human beings. We have collectively accepted across civilizations that cattle, salt, seashells, coins and paper can have value in the exchange of goods and services. Today, governments have chosen as their means of trade currencies that have a value without it being intrinsic to them. Adopted several centuries ago, this vision of money is dominant in the world and we speak of “fiat money” to designate it in general. It is often put in opposition to cryptocurrency, decentralized and independent of governments and economic institutions such as the world Bank.

What is fiat currency?

A fiat currency is a currency whose value comes mainly from a government or an institution which decides on its legal tender. It is to be distinguished from commodity currencies and cryptocurrencies which derive their value from other factors such as utility, scarcity or confidence beyond their mere quality of currency.

Word ” fiat “Comes from Latin and means“ let it be done ”, a term that refers to the notion of an authority that imposes something. The expression “fiat currency” comes from the English “ fiat money “, Language which kept the term” fiat In his vocabulary. In France, as in many countries of the European Union, it is the euro which appears to be legal tender and it even has a monopoly in France. The same is true for other countries with their own currencies, and this is why conversions are necessary when traveling or wanting to order on a foreign site.

Although it is the dominant form of currency today, this hegemony could be turned upside down by the meteoric rise in popularity of cryptocurrencies, such as the Bitcoin, which continue to be adopted by an increasing number of users.

Fiat money is not to be confused with fiat money and scriptural money which respectively designate money physical like banknotes and dematerialized currency like checks and bank transfers.