Onchain fiat is covered in full under Fiat On-Chain, which explains how national currencies are brought onto blockchains and the issues involved. "Onchain fiat", written as one word, is a common spelling of the same idea on crypto sites and in industry reports.
The phrase refers to fiat currency, such as US dollars, euros or yen, represented as tokens that can be held in crypto wallets and moved over blockchain networks. The main forms are:
- Fiat-backed stablecoins. Private issuers hold cash and short-term government debt and issue tokens redeemable one-for-one, such as USDC.
- Tokenized bank deposits. Banks represent their own customer deposits as tokens, so the claim stays on the bank's balance sheet; see tokenized deposit.
- Central bank digital currencies. Some central bank pilots test direct central bank liabilities on distributed ledgers.
Onchain fiat lets people send dollar value across borders at any hour and use it inside DeFi applications. Its safety depends on the quality of the reserves and on redemption rights, which is why many jurisdictions now regulate issuers. Getting money into and out of these tokens runs through a fiat on-ramp or off-ramp.