What is Fiat Currency?

A fiat currency is any type of government-issued currency that is used as legal tender by a specific nation, government, or region's citizens. Fiat currencies are not backed by a physical commodity (like gold or silver), but instead by the government that issued it. As a government-regulated instrument, it functions as a medium of exchange, store of value, and unit of account. To function as fiat, money must be durable, portable, divisible, uniform, acceptable, and limited in supply. Most modern paper currencies are fiat currencies, like the EU euro, Japanese yen, and U.S. dollar.