What Is Fiat Currency?

By Jason Hall – Updated Aug 7, 2025 at 10:09 PM

Key Points

Fiat currency is backed by government resources, not physical assets like gold.
Fiat allows flexible money supply management, aiding economic stability.
Political instability and mismanagement can severely devalue fiat currencies.

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An infographic comparing the similarities and differences between fiat currency and cryptocurrency. — Image Source: The Motley Fool

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US Population Chart — U.S. population data by YCharts.

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US M2 Money Supply Chart — U.S. M2 money supply data by YCharts.

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The U.S. economy and population, however, didn't grow by 38% over that two-year period. Much of that new money issued was debt the U.S. government issued to pay for economic stimulus; similar increases happened in other economies around the world.

The risk is that the massive increase in the money supply could lead to hyperinflation.

Cryptocurrencies and fiat money

Worries about inflation and government control over money and economic policy have led many people to consider cryptocurrencies. As a decentralized digital asset, cryptocurrencies are very appealing to anyone who is suspicious of government manipulation of money. They are also becoming increasingly useful as portable, digital stores of value. And, as we have seen over the past several years as many have gained immensely in value, they can hedge your wealth against inflation.

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Blockchain

Blockchain technology is a transaction ledger on a massive scale, fortified by strong encryption and advanced security protocols.

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About the Author

Jason Hall is a contributing Motley Fool stock market analyst with more than a decade of experience writing about dividend stocks and long-term investing. He has been with the company since 2012 and previously spent over 10 years in technical sales in the printing and information services industry. Jason also founded and operated a small food manufacturing business.

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Jason Hall has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.