How fiat currency works
Fiat money exists as notes and coins and, far more, as balances in accounts: at the central bank for banks, at commercial banks for everyone else. A payment in fiat is a change to those balances, carried by payment systems such as SEPA, Faster Payments or the card networks.
EU law avoids the word. The Markets in Crypto-Assets Regulation speaks of an official currency, which it defines as an official currency of a country that is issued by a central bank or other monetary authority.
The fiat side of a crypto product
Every crypto business that serves the public touches fiat somewhere: customers pay in by card or bank transfer and expect to cash out the same way. That side takes what any payments business takes:
- A bank or payment institution willing to hold the customers' money
- Named accounts or IBANs, so that incoming transfers can be matched
- Card acquiring for purchases, with its chargeback risk
- A ledger that keeps fiat and crypto balances for each customer
- Identity and anti-money laundering checks on each customer
Fiat currency, stablecoin or CBDC?
- Stablecoin
- A crypto-asset from a private issuer that aims to hold the value of a fiat currency. A stablecoin is a claim on its issuer, not money issued by a central bank.
- CBDC
- A digital form of fiat currency issued by the central bank itself.
Where Fiat currency shows up in a platform
Modules that do the work
- Accounts & IBANsCustomer accounts with their own IBANs, on the partner bank and the rails you choose.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
- FXCurrency conversion with live rates, your margins and the liquidity provider you choose.
- Card acquiringCard acceptance on the phone, in store and online, through the acquirer you choose.
Platforms that need it
Guides that go deeper
- Crypto on-ramps: how a buy widget works and who needs the licenceHow a fiat-to-crypto buy widget works inside another company's app, who the regulated party is, and the rules on UK promotions, card fraud, the Travel Rule, MiCA and VARA.
- White-label crypto banking: the software, the two licences and who holds whatHow a crypto banking app works: an IBAN account, crypto wallets, conversion and a card, the two licences behind them, who holds the money and the coins, and SaaS, API or source code.
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.