![]() Fiat also differs from representative money, which is money that has intrinsic value because it is backed by and can be converted into a precious metal or another commodity. They trust that it will be accepted by merchants and other people.įiat money is an alternative to commodity money, which is a currency that has intrinsic value because it contains a precious metal such as gold or silver which is embedded in the coin. It has value only because the people who use it as a medium of exchange agree on its value. In modern times, fiat money is generally established by government regulation.įiat money does not have intrinsic value and does not have use value. Throughout history, fiat money was sometimes issued by local banks and other institutions. ![]() Look up fiat in Wiktionary, the free dictionary.įiat money (from Latin: fiat, "let it be done") is a type of money that is not backed by any commodity such as gold or silver, and typically declared by a decree from the government to be legal tender. Yuan dynasty banknotes are a medieval form of fiat money.
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