Fiat refers to a type of currency that is issued by a government, and it has value because the government maintains its value, or because two parties in a transaction agree on its value. Some commonly recognized examples of fiat currency include the Dollar (USD), Euro (EUR), and Yen (JPY). In the context of cryptocurrencies, 'fiat' often refers to these government-issued currencies, and is used to differentiate traditional money from digital currencies like Bitcoin and Ethereum.

Fiat vs Cryptocurrency: Key Differences

While both types of currency serve as a medium of exchange, store of value, and unit of account, there are significant differences between the two:

  • Control: Fiat money is regulated by central banks of a country while cryptocurrencies are decentralized and operate on blockchain technology.
  • Supply: The supply of fiat money is physically unlimited as it can be produced by the central bank, while the supply of most cryptocurrencies is limited.
  • Transaction speed: Cryptocurrencies often offer faster transaction speeds compared with traditional banking methods associated with fiat.
  • Privacy: Cryptocurrencies offer a degree of privacy for personal transactions that is not usually afforded by fiat transactions.

Fiat-Crypto Relationship

Given that the primary objective of cryptocurrencies is to act as a form of money, there is a close relationship between 'fiat' and 'crypto'. Most cryptocurrencies are primarily traded against fiat currencies in crypto exchanges. This is often displayed in the form of trading pairs (e.g. BTC/USD, ETH/EUR) on various cryptocurrency trading platforms.

Fiat-to-Crypto Trading

For someone to acquire cryptocurrencies (unless they're being paid in it), they typically need to use fiat currency to buy it. Many cryptocurrency exchanges provide a service of trading fiat money into cryptocurrencies and vice-versa. The prices are determined based on supply and demand mechanics in the market.


Understanding the term 'fiat' and its relationship with cryptocurrencies is fundamental for anyone exploring the world of digital currencies. It will not only help in understanding the economics behind these currencies but also in making informed crypto trading decisions.