Fiat
Fiat currency is government-issued money that is not backed by a fixed quantity of a commodity such as gold. Examples include the US dollar, euro, British pound, and Japanese yen.
✦ Key Insight
Fiat is the traditional monetary system through which most users enter and exit cryptocurrency markets. Crypto prices are commonly quoted in fiat terms, and exchanges often provide fiat deposits or withdrawals through banks, cards, and payment services. Understanding fiat also helps users distinguish between bank money, stablecoins, and native cryptocurrencies.
✕ Common Misconceptions
Treating stablecoins as identical to fiat bank deposits
Confusing fiat with physical cash only
Ignoring bank transfer fees
Assuming every exchange supports every national currency
Ignoring withdrawal restrictions
Detailed Explanation
How It Works
Fiat currencies are issued and managed within national monetary systems.
Central banks influence money supply and interest rates, while commercial banks and payment networks help users store and transfer balances.
Crypto exchanges connect fiat and crypto through on-ramp and off-ramp services.
FAQs
Is USDC fiat?
No. It is a blockchain-based stablecoin designed to track the US dollar.
Is cash fiat currency?
Yes, although fiat also includes digital bank balances.
In Practice
Dig Deeper
Stablecoin
A cryptocurrency designed to maintain a stable value, usually pegged 1:1 to fiat like USD (e.g., USDT, USDC).
ACH Transfer
An ACH transfer is an electronic bank transfer processed through the US Automated Clearing House network. Crypto exchanges and financial platforms may support ACH transfers for moving US dollars between a user's bank account and their platform account.
On-Ramp
A crypto on-ramp is a service that allows users to convert traditional money, such as US dollars or euros, into cryptocurrency.
Off-Ramp
A crypto off-ramp is a service that allows users to convert cryptocurrency into traditional fiat money and send the proceeds to a bank account, card, or another payment method.