What is Fiat Currency? 🤔

The term fiat means an order or an official decision. So, if a currency is created by an official decision from the government, it can be said that the currency is created by fiat.

This statement is even on banknotes in various countries. For example, in the Rupiah it is written "By the grace of God Almighty, the unitary state of the Republic of Indonesia issued the Rupiah as a legal means of payment with value."

In US Dollars it is written "This note is legal tender for all debts, public and private." This is proof that the currency is fiat.

FYI: Currencies like the US Dollar are initially backed by reserve assets like gold and silver. This system is called The Gold Standard. But in the 1930s, America decided to leave the system and ended international conversion in 1971.

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