Fiat is government-issued currency like the US dollar or euro that is not backed by a physical commodity but by trust in the issuing government.
Fiat currency is money issued and backed by a government rather than by a physical commodity such as gold. Its value comes from public trust and the authority of the issuing state.
Examples include the US dollar, euro, yen, and British pound. Fiat is legal tender, meaning it must be accepted for debts and transactions within its country.
Because central banks can adjust the money supply, fiat currencies can lose purchasing power over time through inflation. This is one reason some investors hold assets like gold or Bitcoin as a potential hedge.
In crypto, "fiat" is the everyday word for traditional currency, as in "cashing out to fiat" or "fiat on-ramp," which describes converting between government money and digital assets.
When you deposit dollars on an exchange to buy crypto, you are using a fiat on-ramp — converting government money into a digital asset. Later, selling that crypto back into your bank account is "cashing out to fiat." The US dollar, euro and yen are all examples of fiat currency.
Fiat currency is backed by the authority and credibility of the issuing government and by public trust, rather than by a physical commodity such as gold. It is legal tender, meaning it must be accepted for debts within its country.
A fiat on-ramp is a service that lets you convert traditional government money, such as dollars or euros, into cryptocurrency. The reverse, turning crypto back into government money, is often called cashing out to fiat.
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