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What is Fiat?
Despite what you might think, in the cryptocurrency world, the word fiat doesn’t refer to the car manufacturer. Instead, “fiat” actually means non-digital money. As you’ll see when you read our crypto glossary, fiat currencies are controlled by a centralised power and given their value by various economic factors. Pounds, Dollars, Yen are all examples of fiat currencies.
“Fiat money is currency that a national government has deemed to be legal tender. The value of fiat currencies is derived based on the level of supply and demand.”
Digital currencies such as Bitcoin (BTC) and Litecoin (LTC) aren’t controlled by a national government and, in turn, may not be deemed legal tender. Although the latter point may soon become incorrect due to the growing acceptance of cryptocurrencies, the former will never change. Indeed, it’s the decentralised nature of cryptos that make them distinct from fiats. Instead of a central power making, distributing and having an influence on the price of a coin, cryptos are controlled by no-one.
Do All Exchanges Offer Fiat Trading?
The simple answer is no. In the early days of cryptocurrencies, the only way anyone could own some is by mining them or receiving from an acquaintance. As the industry grew, people wanted an easier way to share digital tokens. That desire gave rise to exchanges where people could buy and sell their crypto tokens. These early exchanges were non-fiat. In other words, they were designed to be 100% crypto exchanges, only allowing to buy cryptocurrency with cryptocurrency.
However, as more people have entered the industry and became interested in decentralised technology, exchanges have changed. To cater to the masses, certain exchanges now accept fiats. By doing this, more people have been able to trade crypto tokens and, importantly, they’ve felt comfortable doing it. When novices weren’t able to deposit or withdraw funds in fiat using Visa and other bank cards, they not only felt like the process was too complicated but something they couldn’t profit from. Once fiats were introduced, people could see the real value of their trades. That, in turn, made them more eager to invest.
Today, fiat-to-crypto exchanges are a big deal, as are online brokers such as eToro. The former allows you to deposit in your native currency and withdraw funds to a crypto wallet. However, the latter removes the need for a crypto wallet and allows you to make deposits and withdrawals in fiat.
What are the Most Common Currencies Used in Fiat Trading?
Although the leading crypto exchanges are gradually introducing more fiat options, there are certain currencies that dominate. The reason for this is partly local regulations and the popularity of certain currencies. As a general rule, the US dollar is the main fiat used when you want to buy BTC. Beyond dollar exchanges, GBP/BTC exchanges are popular, as are those accepting EUR payment. In the future, the list of fiat crypto exchanges will expand. However, for now, the easiest way to buy digital tokens is via USD, GBP and EUR.
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