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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.
DEFINITION of 'Convertible Currency'. A currency that can be readily bought or sold without government restrictions, in order to purchase another currency.A convertible currency is a liquid instrument when compared to currencies tightly controlled by a central bank or other regulating authority.Next Up. convertible currency is a liquid instrument when compared to currencies tightly controlled by a central bank or other regulating authority.