tl;dr
- Most national currencies (USD, GBP, Euro) are fiat.
- Fiat is not backed by physical commodities but by government trust.
- Bitcoin was the first crypto, launched in 2009 with a message criticizing banks.
- Cryptos are decentralized, secured by cryptography, and typically have a limited supply.
What is Fiat?
Most, if not all, national currencies today are fiat currencies, including the US Dollar, British Pound, Euro, and many others. Fiat currencies are issued by governments and are not backed by physical commodities like gold or silver, but rather by trust in the issuing authority.
In the past, many currencies were partially or fully backed by precious metals, but by the 1970s, this practice was largely abandoned.
The term "fiat" comes from Latin, meaning "let it be done," reflecting the idea that money has value simply because the government declares it so.
Fiat money holds no intrinsic utility and cannot be used for anything other than exchange. Its value is maintained through central banks, legal tender laws, and monetary policy. Fiat currency allows governments to manage their economies more flexibly, but also creates potential for inflation if mismanaged.
What are Cryptocurrencies?
Bitcoin was the first cryptocurrency to launch, with its Genesis Block including an encrypted message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” This message hints that Bitcoin, and cryptocurrencies in general, may have been created as both a criticism of and an alternative to fiat currencies.
Cryptocurrencies are decentralized virtual currencies secured by cryptography. Unlike fiat money, most cryptocurrencies have a limited supply, increasing their value as they grow in adoption. They provide semi-anonymous transactions and operate on blockchains, which are open, distributed ledgers that record and verify all transactions transparently. This makes crypto resistant to censorship and centralized control.
As of April 2025, according to CoinMarketCap, there are over 18,800 active cryptocurrencies and tokens in circulation
What are Stablecoins?
Stablecoins are cryptocurrencies designed to maintain a stable value, unlike volatile assets like Bitcoin. They achieve this by pegging their price to reserve assets, typically fiat currencies like the US dollar (e.g., 1 stablecoin = 1 USD).
Most stablecoins operate as tokens on smart contract blockchains like Ethereum and require gas tokens (e.g., ETH) for transactions. Traders help maintain their peg by buying stablecoins when the price drops below $1. Stablecoins combine the speed and accessibility of crypto with price stability, making them ideal for payments, trading, and storing value during market downturns.
BitUSD was the first stablecoin and launched in July 2014 on the BitShares blockchain, although it is no longer active. It was backed by crypto collateral and developed by Dan Larimer and Charles Hoskinson.
Tether (USDT), initially introduced as “Realcoin” later in 2014, became the first major fiat-backed stablecoin and remains the most widely used stablecoin to date.
Are Cryptocurrencies Regulated?
Most cryptocurrencies were launched without regulatory approval and initially faced skepticism from regulators and banks. However, as adoption has grown, regulatory attitudes have shifted.
In the U.S., the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) oversee crypto assets. The CFTC also regulates crypto derivatives.
In the UK, the Financial Conduct Authority (FCA) leads efforts in anti-money laundering (AML), counter-terrorism financing (CTF), and broader crypto regulations.
What's the Difference Between Fiat & Cryptocurrency?
Fiat and cryptocurrency differ in origin, form, and control. Fiat currencies are government-issued and have value because the issuing authority declares it. They're physical or digital and centralized, controlled by central banks.
Cryptocurrencies, like Bitcoin, are decentralized digital assets secured by cryptography and powered by blockchain technology. Their value is determined by market demand and supply, not government mandate.
How Are They Similar?
While there are many differences between fiat and cryptocurrencies, there is some common ground.
Both can be a medium of exchange to store and transfer value. Fiat can also exist in virtual form for online transactions. Lastly, regulators now overlook both assets.

Conclusion
While cryptocurrencies continue to grow in popularity, widespread adoption as official tender remains limited. El Salvador made headlines by adopting Bitcoin as legal currency, but most nations remain cautious. It could take decades for global governments to fully embrace cryptocurrencies, if at all.
However, momentum is building. If former President Trump follows through on his promise to create a U.S. strategic crypto reserve, it would mark a historic shift. In that scenario, the U.S. dollar could become partially backed by cryptocurrency, blending elements of traditional fiat with emerging digital assets.
Such a move could redefine monetary policy in the digital age.