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What are the differences between Fiat Currency and Cryptocurrency? Fiat Currency vs Cryptocurrency? How is Bitcoin different from Fiat Currency? Does Cryptocurrencies replace fiat currency?
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Difference Between Fiat Currency and Cryptocurrency
With the increase in transactions through electronic money, some people continue to believe that cryptocurrencies could be the currencies of the future. Fiat money or fiat currency is declared a legal tender by the government. The cryptocurrency is not a legal tender and not backed by the government. Here we will discuss more about both the currencies and significant Difference Between Fiat Currency and Cryptocurrency.
Fiat currency is a legal tender backed by the central government. The fiat currency is issued and regulated by the central authorities. The fiat currency can be in the form of physical dollars like – Federal Reserve notes, or it can take the electronic form, such as bank credit. The government controls the supply of the fiat currency, and citizens can pay their taxes using it.
Cryptocurrency is a digital or virtual currency that works as a medium of exchange. Cryptocurrency is not a legal tender, and it is not backed by the government or central bank. As cryptocurrency is virtual in nature, an algorithm – ‘cryptography technology’ is used to process, secure, and verify transactions. You won’t be able to pay taxes using cryptocurrencies, although you have to pay taxes on it.
Both currencies are used as a mode of payment, but there are significant differences between them. Let us move to the Difference Between Fiat Currency and Cryptocurrency.
Fiat Currency vs Cryptocurrency
Both fiat currencies and cryptocurrencies are means of exchange, but cryptocurrencies have not developed enough to replace the fiat currencies or standard payment methods. There is quite a possibility that the crypto market will create a complementary product that might replace the current monetary system.