Gareth Johnson
Gareth Johnson
Updated on December 1, 2023

Crypto beginners need to learn a lot of specific expressions used in cryptocurrency trading in order to fully understand the language commonly used in day-to-day crypto operations. Just like any other industry, the crypto market has a bunch of internal expressions that are used to label various market sentiments, assets, and trading strategies.

However, there is one word that is very frequently used among crypto traders but it doesn’t actually originate from the world of digital currencies. That word is fiat and you can usually hear it among crypto brokers in the form of fiat money or fiat currency.

Let’s take a look at where the word fiat comes from, what its roots are, and what the expression fiat money means.

Etymology of the Word “Fiat”

The etymology of the word fiat is one of immense authority and power. The word originates from the Latin language, with the meaning “let it be done”, written in the book of Genesis, which is the first part of the Bible. The literal Latin translation of God’s biblical commandment “let there be light” is fiat lux.

Given its biblical origins, the word fiat was regarded as a word that carries considerable weight of authority and indisputability. In the 17th century, a common use of the word among English speakers was to describe official laws, orders, and decrees issued by royalty or the church. Fiat meant a sort of divine authority that can’t be questioned, and this is why it was used to address royal or clerical orders.

Winking curly haired woman holding US bank notes on light blue background

The use of fiat slowly changed, and in the 19th century, people were already using it to describe orders and commandments by all instances of state authorities. The expression “fiat in bankruptcy” gained popularity as a way to describe the official bankruptcy of businesses and by the end of the century, the modern expression “fiat money” was born. 

A popular use of the word fiat today is the name of the Italian automobile giant Fiat, which is not only used in regard to the powerful biblical word, but it’s also the abbreviation for Fabbrica Italiana Automobili Torino, which means Italian Automobile Factory from Turin.

Throughout the ages, fiat has been adopted as a word that’s used to reassure the authoritative and official characteristic of a government act or in the most modern case, the value of government-issued money. Modern paper money has no intrinsic value. The paper bills of EUR, USD, AUD or other fiat currencies are valuable because of the laws and regulations that guarantee their use and recognition as a store of value.

Synonyms to the Word Fiat in the English Language

There are various synonyms for fiat in the English language. According to the English dictionary Wiktionary and the Thesaurus platform, fiat is synonymous with: authorization, command, decree, mandate, edict, ukase, sanction, and several other words that all symbolize acts of unquestionable authority. 

A contemporary definition of fiat would definitely be focused on official decrees, laws, and legally binding acts issued by the government. 

There are extensive word lists and examples of fiat use through example sentences and expressions on Wiktionary, such as: 

  • A presidential fiat.
  • A judicial fiat.
  • To rule by fiat.

Fiat Money

Now that the history of the word fiat is clear, it doesn’t come as a surprise that government-issued currency is called fiat money. Before fiat money was invented, economic systems around the world were operated by commodity money that was produced in the form of coins made out of different more or less precious metals such as gold, silver, bronze, and copper. Many countries even had the gold standard rule of backing paper bills with gold reserves in the beginning of the 20th century, but later abandoned this practice.

Australian bank note close up

Fiat currency paper money, however, didn’t have any value by itself. Paper USD bills, for instance, are just a special type of paper made to be durable, but the paper itself is barely worth anything. What gives the 100 USD bill its value is the guarantee of the US government and its central bank that the 100 US dollar bill is a piece of paper with a certain value. 

Determining the Value of Fiat Money

This means that fiat money is legal tender whose liquidity is controlled by financial institutions and less by the market, because, in case of unfavorable inflation rates, the government can and does print additional bills and puts them into circulation. Also, governments often issue specific laws and regulations in order to ensure that the market doesn’t lead to a collapse of the value of fiat money in their country.

Unfortunately, less influential countries can’t control their inflation rates as efficiently as the USA or the European Union and that’s why their local fiat currencies are often much less valuable on the international market than currencies such as USD, EUR, or GBP.

In the crypto world, fiat money is used to address real-world money, mostly when people are investing in cryptos or when they want to cash out, because if you want to use your crypto earnings in the official monetary system, you need to cash it out into fiat money. Also, the first time you want to buy cryptocurrencies, you need to do so with fiat money.

A Few Final Words…

For crypto beginners, seeing the expressions fiat money or fiat currency on crypto exchange platforms, wallet apps, and social media groups can be quite odd, because beyond the world of cryptocurrencies and finance, fiat money as an expression is rarely used. If you’re starting crypto trading, it’s best that you understand the expression as soon as possible, since you’ll surely be doing a lot of conversions from fiat to crypto and the other way around.

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