What is fiat currency? Why pounds and dollars have value
By SendPay Business · · 2 min read
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- 2Choose what it does
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Fiat currency is money that a government declares to be legal tender but that is not backed by a physical commodity such as gold. The pound, the euro and the US dollar are all fiat currencies. Their value rests on trust in the government and central bank that issue them.
Fiat vs money backed by gold
Under a gold standard, a note could be swapped for a fixed amount of gold. Most countries left that system during the 20th century; the US ended the dollar's link to gold in 1971. Since then, major currencies have been fiat money.
Who controls the supply
Central banks, such as the Bank of England, set interest rates and can create money to steer inflation and the economy. That flexibility is the main strength of fiat money, and printing too much is its main risk, because it can drive high inflation.
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Fiat vs crypto and stablecoins
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Tap each one to see what it means.
Fiat
issued by a government, controlled by a central bank.
Bitcoin
issued by a network, with a fixed maximum supply.
Stablecoins
crypto tokens designed to track a fiat currency such as the dollar.
Where SendPay fits
SendPay platforms include GBP, EUR and USD accounts, transfers and currency exchange under your own brand, and let your customers buy, sell and hold crypto next to their cash, powered by licensed partners.
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Questions people ask
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Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.