Topic
What is fiat money?
Last reviewed:
- Quick fact 1
U.S. coins and currency, including Federal Reserve notes, are legal tender for all debts.
- Quick fact 2
Federal Reserve notes are not redeemable in gold or silver.
Source: Federal Reserve: Is U.S. currency still backed by gold?
- Quick fact 3
For federal tax, the IRS treats digital assets as property, not as currency.
Source: IRS: Digital assets
The short lesson
Fiat money is money a government declares to be legal tender. The US dollar is fiat money. So are the euro, the peso and the rupee.
“Fiat” comes from the Latin for “let it be done.” The money has value because the law makes it legal tender, people accept it, and taxes are paid in it. It is not backed by a fixed amount of gold. US dollars have not been exchangeable for gold since 1934.
How crypto is different:
- Who issues it. A central bank manages fiat money. Bitcoin follows rules written in its software, kept by a network.
- Legal status. In the US, the dollar is legal tender. For federal tax, the IRS treats crypto as property.
- Price. Crypto prices can swing sharply against fiat money.
When people say “fiat on-ramp,” they mean a way to turn dollars into crypto, such as an exchange. “Off-ramp” means turning crypto back into dollars.
Stablecoins try to track fiat money. Read What is a stablecoin?
Related terms
Go deeper in Lesson 7: What an exchange is
Common questions
Is the US dollar backed by gold?
No. Federal Reserve notes have not been redeemable in gold since 1934.
Is crypto fiat money?
No. Crypto is not issued by a government as legal tender. For federal tax, the IRS treats it as property.
What is a fiat on-ramp?
A service that lets you turn regular money into crypto, such as an exchange.
Is a stablecoin fiat money?
No. A stablecoin is a token designed to track a fiat currency. It depends on its issuer and its reserves.