The Reserve Bank of India (RBI) on January 25, 2021 said that it was open to exploring the possibility of a digital version of fiat currency amid increasing popularity of virtual currencies in various parts of the world .
- Fiat currency or Fiat money is a government-issued currency that isn’t backed by a commodity such as gold.
- The value of fiat money is largely based on the public’s faith in the currency’s issuer, which is normally that country’s government or central bank.
- Fiat currency or Fiat money gives central banks greater control over the economy because they can control how much money is printed.
- Historically, commodity money has an intrinsic value that is derived from the materials it is made of, such as gold and silver coins. Fiat currency by contrast, has no intrinsic value – it is essentially a promise from a government or central bank that the currency is capable of being exchanged for its value in goods.
- Most modern paper currencies, such as the pound sterling, the euro and the US dollar are fiat currencies.
