25 Differences Between Fiat Money and Cryptocurrency

What are the differences between fiat money and cryptocurrency? You will come across words like cryptocurrencies and Bitcoins these days as the finance world is shifting towards a cashless society, slowly but surely.

This means that the payment system is in a stage of changing into a digital economy.

Ideally, with several payment gateways available including credit cards and debit cards, today a major portion of the money is exchanged electronically.

As of now, only a small percentage of the entire global money is represented in its traditional physical forms of fiat currencies.

Both the forms of currencies, fiat and crypto, have two crucial features which are that these both act as a store of value and allow making frictionless payments between the parties involved.

And, in both the forms buyers and sellers trust that the value of the currency will be sustained after the transaction is made.

However, the differences between the two currencies are much more than these similarities.

Considering the basic difference that can be put in simple words, typically, the term ‘fiat currency’ refers to the money issued and backed by the government of a country.

This is considered to be a legal tender and not simply as a tangible commodity. Check out Differences Between Crypto Wallet and Exchange.

Cryptocurrency, on the other hand, is a digital mode of exchange. It is considered to be far more secure since it uses encryption techniques and is radically different from the conventional forms of fiat currencies.

However, these coins can be bought or sold just like any other commodity.

25 Differences Between Fiat Money and Cryptocurrency

Differences Between Fiat Money and Cryptocurrency

In spite of this notable fact that the society, on the whole, is on the verge of changing into an advanced economy, not many people understand the difference between cryptocurrency and fiat money.

This is where this article will come to your help if you too are unaware of the differences.

You will come to know much more than the basic differences between the two forms of currencies and step into the exciting world of crypto with full confidence.

1. The Trust Factor

When it comes to trust, both these forms of currencies seem to have enough of it though the factors of it vary. In the case of fiat currencies, the trust lies in the fact that it is issued and backed by the government of the country.

However, on the other hand, the trust vested in crypto coins is mainly on its underlying technology called blockchain technology.

2. Third-Party Influence

Related to trust, when you use fiat currencies to buy any goods or services, you typically rely on a third party which is a dependable authority such as the central bank or any other governmental institution.

Everything in cryptocurrencies is based on a decentralized ledger system that is dependent on blockchain and a transaction is validated through the consensus from the members within a specific network.

3. Intermediaries

When you deal with fiat currencies, the banks usually act as the intermediary while a transaction is being made. They typically certify the worth of the currency.

On the other hand, as for the cryptocurrencies, it is termed as ‘trustless’ because there is no person acting as an intermediary while you make a transaction.

4. Forms

The cryptocurrencies usually come either in the form of a coin or a token. These are ideally public and private pieces of code. Each of these has a different value which is normally determined by its market capitalization.

On the other hand, fiat currencies traditionally come in a physical form of money but sometimes it can also be represented electronically such as by a bank credit. The different physical forms of fiat currency include banknotes, paper currency, bills, coins, and more.

5. Popular Units

There are tens of thousands of different types of cryptocurrencies currently available in the market as of now. Some of the most popular units of cryptocurrencies are Bitcoin, Ethereum, Litecoin, Dash, Ripple, and more.

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On the other hand, some of the most significant units of fiat currencies of the world include the US Dollar, Pound, the Euro, the Yen, and more.

6. Control of Supply

According to the need and economic conditions, governments can issue new fiat currencies since everything is controlled by the government.

In contrast, the crypto coins are issued by a company.

7. Need for Issuance

Fiat currencies are issued to meet the demand and supply of money while keeping in mind other important aspects such as inflation and deflation and accordingly the monetary value is determined.

Cryptocurrencies on the other hand are especially issued to raise funds apart from allowing its transfer and using as a mode of payment. It is also done to meet the demand and supply of a specific coin.

Most coins have a specific amount in circulation and sometimes these are ‘burned’ to keep it within the fixed rate or create scarcity to raise its value.

8. Legality

Fiat currencies are considered to be the legal tender in all countries of this globe. The governments issue policies from time to time that influence their value and are regulated by the central banks.

However, digital assets like cryptocurrencies and its use is banned in several countries since they feel it can be used to fund illegal activities such as money laundering and terrorism. And, in the countries where it is accepted, it is not backed by the government.

9. The Value

The value of the fiat currencies is its attributed value since it is declared as a legal tender by the government. It is quite low because its supply is unlimited and can be increased as and when required.

On the other hand, the limited supply of crypto coins raises its demand and thereby its intrinsic value is much more in comparison to the fiat currencies.

10. Fund Transfer

You can use a fiat currency to transfer funds both digitally as well as in their physical form in person in the retail outlets.

While the transfer of funds using crypto coins can only be done digitally because it is based on blockchain technology and consensus mechanism.

11. Tangibility

Since you will get fiat currencies in the forms of notes, coins, and bills, these are considered to be tangible. This physical aspect of fiat currencies however presents a lot of challenges at times when you need to move around a lot of money.

On the other hand, you cannot sense or touch crypto coins since the units created are simply added as new blocks in the blockchain and operate as only virtual coins online.

12. Storage

You can store fiat currencies in all their forms in any traditional bank account existing in the country though these banks do not act as a custodian for hard currencies.

It is due to the versatility of fiat money that allows payment providers like PayPal and others to store fiat money in a digital form as well.

However, you will need to store the crypto coins in either a distinct digital wallet or in a wallet that is integrated into the exchange platform itself.

Though most of these digital wallets claim to have adequate and proper safety measures, there have been a lot of instances when these were hacked to steal a substantial amount of coins from them.

13. Tracking

It is very easy to track and monitor fiat currencies by anyone and can also be recognized easily by the recipient or the issuer.

The crypto coins, on the other hand, cannot be tracked by others who are not authorized or are not the members of a specific network.

14. Safety

When it comes to the safety aspect of the two currencies, the fiat currencies are considered to be much safer. This is once again due to the fact that it is controlled and backed by the government of the country.

The crypto coins, on the other hand, are not very safe because the transactions in this specific field usually happen anonymously.

And, since there is no backing from the government, you cannot do much in case you are unlucky and lose your money due to unfavorable incidents such as hacking of your account.

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15. The Time Factor

Unless you make an online payment or use fiat currencies electronically to make a payment such as through your credit card or debit card, you will have to make a transfer of funds within the operational hours of the banks, and certainly not on national holidays.

On the other hand, since the crypto market is open day and night and even on holidays you can literally make a fund transfer to anyone, anywhere in the world and at any time of your convenience.

16. The Debt Concept

Fiat currencies ideally equate debt. This is because when the banknotes are issued to you by the central bank as a consumer it is actually issuing a portion of the debt of the government at the same time.

This is because banks can only create money when consumers borrow it from them and pay interest for the same.

However, in the case of crypto coins issuance, this is not the case. These are typically issued to raise funds which the people buying the coins pay to the issuing company simply to have ownership of the coins.

These buyers can only make a profit when they sell these coins at a higher price in the near or distant future. Its value depends on how effective it is as a mode of exchange.

17. The Volatility Factor

The extremely high volatile nature of the cryptocurrencies makes it quite difficult for the businesses to accept these as a mode of payment for the purchase of goods and services. Since it affects the value significantly, it is difficult to contend with or comprehend.

On the other hand, the fiat market is less volatile and therefore every merchant all over the world accepts these readily as a favorable and reliable mode of payment for the goods and services sold.

18. Store of Value

The store of value of cryptocurrencies is considered to be much more in comparison to fiat currencies due to the fact that its value is pegged to an underlying asset such as a crypto, fiat money, or a commodity, adding to its functionality as well.

On the other hand, fiat currencies, though reliable, there are a few that are subject to unproductive monetary policy and inflation. This has resulted in a lower store of value in spite of the low volatility of the fiat currencies.

19. Transparency

The cryptocurrencies are considered to be much more transparent due to the simple reason that it derives its intrinsic value from the native blockchain.

The monetary policies are written into the code base of the protocol. Since these are based on the consensus mechanism and governance of the protocol itself and not any single central authority, it is more transparent in spite of having no fiscal policy in particular.

On the other hand, fiat currencies which have a perceived worth due to their legal tender status lack transparency since all monetary and fiscal policies are made by the central governing authorities such as the central banks and governments.

20. Availability

Fiat and cryptocurrencies also differ in their advantages. Cryptocurrencies are available very fast, in fact, just by a click of a button irrespective of where you are in the world. This allows faster online transferring of money or acquiring coins.

However, if you want to use fiat currency through a traditional bank for the same it may not be as fast since it needs a lot of processing, both manual and automatic.

21. Settlement Time

When you use cryptocurrencies, the settlement time is reduced significantly. You can make almost instant settlements using cryptocurrencies due to the continual acceleration of the widespread adoption of digital currencies.

However, the same cannot be said for the fiat currencies when you use electronic cash settlement systems. It might sometimes take even days to process and complete a transaction to make a settlement.

22. Transaction Fees

One of the most significant reasons for the cryptocurrencies to emerge as the most favored method to send money across the borders is its lower transaction fees.

On the other hand, when you use other gateways of traditional banks for the same, it will turn out to be more expensive in comparison due to the multiple numbers of fees charged down the way.

23. Privacy

Since crypto coins can be transferred anonymously, it gives a lot of privacy both to the senders as well as the recipients. They do not have to share their identities to make a transaction which is another significant aspect for it being so favored and desirable.

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However, in the case of transferring fiat money through traditional banks, you will have to fill a form or pay-in-slip every time you do so with almost all your details. This does not keep the transactions private.

24. Stability

The fact that fiat currencies are more stable than cryptocurrencies, gives the governments and regulators power to find the way to navigate the economy during inflation or recession. It is this factor that also gives it a storing value and facilitates exchanges.

However, with cryptocurrencies being not so stable, it is not an easy task to give it a numerical account or have greater control over the liquidity, credit supply, interest rates and other economic variables.

25. Usage

Since cryptocurrencies are based on complex technologies like blockchain it can be pretty difficult to understand. The lack of knowledge clobbers the sentiments and prospects of the digital currencies which is a significant reason for some countries to shun them.

However, fiat currencies are very easy to use and the fact that a transaction can be reversed once it is made makes it a favorable option for payment. As in the case of cryptocurrencies, a reversal is pretty difficult, if not impossible, if a wrong transaction is made.

Which is Better – Fiat Money and Cryptocurrency?

It is difficult to determine which is better among fiat money and cryptocurrency. Once both these currencies are minted, these can be used for purchasing goods and services or held as investments, traded or exchanged.

However, as of now, fiat money seems to be ruling the world and is more dominant in comparison to the crypto coins.

The simple reason for it is that it is a legal tender that is issued and supported by the governments of the countries, though it lacks an intrinsic value.

Ideally, a majority of the population does not even know anything other than fiat money as a mode of payment and that something like cryptocurrencies also exists in the ecosystem.

Fiat currencies have been there for decades and are therefore more known and reliable. However, cryptocurrencies, though relatively new, have a strong potential to upend the existing financial system.

Based on blockchain technology, cryptocurrencies too have value but being decentralized blockchain networks, these digital currencies are not controlled by a governmental body.

Therefore, digital currencies do not offer the same type of opportunity as fiat currencies to be included in the financial system all over the world. It will take some more time to be adopted on a mass scale.

They both have their significant downsides which give rise to the differences in opinion all over the world among people.

Moreover, in spite of the advantages of cryptocurrencies, it is not considered to be mature yet to replace fiat currencies, which is the current and accepted payment standard.

However, it seems to be just a matter of time when cryptocurrencies will create a positive impact and transform the current monetary system with one or more reliable products.

Though several merchants have started accepting crypto coins for their sales, it has a long way to go to replace fiat currencies.

As of now, it is safe to say that since both have value and can be used for fund transfer and making payments, it is up to the user to choose which form to use, depending on the acceptance in the given environment.


Irrespective of the jurisdiction, crypto and fiat money are two different forms of currencies that are differentiated by their characteristic attributes. However, these characteristics are unknown to the majority of people, until now.