Basic Information
Fiat currency (Legal tender) refers to government-issued money that isn’t backed by physical commodities like gold or silver. Its value stems from public trust in the issuing authority and its ability to maintain purchasing power. Unlike commodity money, fiat currency has no intrinsic value—it’s essentially legalized paper money designated for circulation.
Key points:
- China’s legal tender: The Renminbi (RMB), managed by the People’s Bank of China (PBOC), which oversees its design, printing, and distribution.
- Special administrative regions: Hong Kong (HKD) and Macau (MOP) have their own legal currencies.
Core Concepts
Collaborative Technologies
- Libra: A proposed stablecoin project (now Diem) aiming to integrate blockchain with global payments.
- AI, Big Data & Network Platforms: Technologies synergizing with blockchain for enhanced transparency and efficiency.
Key Participants
- Central banks, governments, financial institutions, enterprises, and banks drive blockchain adoption in monetary systems.
Application Domains
Supply Chain
- Traceability: Blockchain enables end-to-end product tracking.
- Circulation: Streamlines logistics via immutable records.
Public Management
- Social Consensus: Decentralized systems foster trust in public data.
Digital Currencies
- CBDCs (Central Bank Digital Currencies): Sovereign digital money (e.g., China’s digital RMB).
- Cryptocurrencies: Bitcoin, stablecoins (e.g., USDT), and private digital assets.
Finance
- Payments & Settlements: Cross-border transactions (e.g., SWIFT alternatives).
- Securities Trading: Tokenized assets and smart contracts automate compliance.
Technical Features
- Immutability: Data once recorded cannot be altered.
- Decentralization: Eliminates single points of failure.
- Security & Privacy: Encryption protects user confidentiality.
- Smart Contracts: Self-executing agreements coded on-chain.
👉 Explore how blockchain revolutionizes finance
Governance & Regulation
- Legal Frameworks: Policies adapt to oversee digital currencies.
- Compliance Measures: Anti-money laundering (AML) and know-your-customer (KYC) protocols.
FAQ
1. How does fiat currency differ from cryptocurrencies?
Fiat is government-issued and centralized; cryptocurrencies are decentralized and often algorithmically controlled.
2. What role do central banks play in CBDCs?
They issue and regulate digital versions of national currencies to modernize payment systems.
3. Can blockchain prevent financial fraud?
Its transparency reduces fraud but requires complementary legal enforcement.
👉 Dive deeper into blockchain’s potential
Further Reading
- The Impact of CBDCs on Commercial Banks (2014)
- Legal Nature of Digital Currencies (2192)
- Global Competition in Digital Currency (2311)
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