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Yuan dynasty banknotes are the earliest known fiat money. Fiat money is a currency established as money by government regulation or law. The term derives from the Latin fiat (let it become, it will become) used in the sense of an order or decree. It differs from commodity money and representative money.
Fiat money has a less-than-flattering nickname: âtoilet paper money,â or, essentially, paper money. The less crude definition of fiat money is any money that is declared to be legal tender by a government. It is also money issued by any state that is not convertible by law to any other form of currency, such as gold. It is also defined as money with no intrinsic value.