What is fiat money?

Fiat money is a government currency that is not redeemable for a fixed quantity of gold or another commodity. The US dollar and euro are examples. Acceptance depends on the monetary system and confidence in the currency; the label does not mean its purchasing power stays constant.

Is fiat money only physical cash?

No. Banknotes and balances in bank accounts can be denominated in the same currency. The European Central Bank’s explanation of money distinguishes cash from money held in bank accounts. A balance shown in an app does not become cryptocurrency simply because it is digital.

A stablecoin that tracks the dollar is a separate token. Its issuer, reserve arrangements and transfer network differ from those of a personal bank deposit. Circle describes USDC as a cryptocurrency designed to track the US dollar; holding USDC does not put dollars into your bank account.

Example: why dollars and USDC are different

Suppose your bank account holds $100 while your crypto wallet holds 100 USDC. Even when the wallet displays a value of $100, you hold a token there, not a $100 balance at your bank. To receive bank funds, you need a supported conversion and bank withdrawal route. The amount received can differ after pricing and fees, so equal displayed values do not make the two holdings interchangeable.