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Home Is the Australian dollar a fiat currency?
06 Mar 2023 By PAYCEC
Most modern paper currencies, including the Australian dollar, and euro, are fiat currencies. According to the Australian Tax Office, Fiat is a currency established by government regulation or law, such as Australian dollars. That's all there is to it. One of the reasons a country's currency is more than just polymer notes with printed numbers is that you have to pay taxes with them.
The value of the Australian dollar is determined by supply and demand in the global foreign exchange market and is managed by the Reserve Bank of Australia.
Since the early 20th century, most currencies around the world have been fiat currencies, including the Australian dollar. This means that their value is not tied to any physical commodity or precious metal, but rather to the trust and confidence placed in the government that issues them. The stability and success of a fiat currency ultimately depends on the economic and political conditions of the issuing country.
Fiat money is valid without any commodity backing it. It carries many risks because countries frequently print too much money to stimulate economic growth, resulting in inflationary pressure. Unlike fiat money, cryptocurrencies are decentralized, meaning no authority or country approves or has a say in their distribution. They are digital assets that live on Blockchain technology and can serve as a medium of exchange, a store of value, and a unit of account.
Blockchain in payment processing eliminates the need for an expensive and inefficient intermediary such as a bank. However, the problems with blockchain payment technology are instability, high transaction speeds, and energy consumption. As a result, despite technology research undertaken to address these issues, there is a long way to go before blockchain transactions take over the world.
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