Fiat currency acts as the main gateway between regular banking and crypto. Most people buy their first Bitcoin or Ethereum with dollars, euros, or whatever money their government prints. They use exchanges like Coinbase or Binance to make the swap.
Crypto exchanges depend on fiat connections. You move regular money from your bank account, trade it for cryptocurrency, and eventually convert your crypto back into cash you can actually spend. Cut out these fiat links, and crypto becomes trapped in its own world.
Stablecoins tie themselves to fiat currencies. USDT and USDC match the US dollar’s value, giving crypto traders a place to stash money without the wild price swings. These coins help you jump between different cryptocurrencies while your value stays anchored to dollars.
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Regulators track fiat-to-crypto transactions hard. Banks flag big deposits and withdrawals. Tax collectors care when you turn crypto into fiat because that’s when you owe capital gains taxes. This fiat connection hands governments their main tool for controlling crypto markets.
Plenty of crypto fans view fiat as the enemy. They blame inflation, government meddling, and endless money printing as reasons to dump traditional currency altogether. But even the truest believers usually check their portfolio’s value in dollars or euros. Everyone continues to use fiat as the benchmark.