Why does fiat money have value?

Fiat money has value primarily because a government maintains it and declares it to be legal tender, meaning it must be accepted for payment of debts. Its value is also supported by the trust and confidence of the public in the issuing government and its economy. Unlike commodity money, which is backed by a physical asset like gold or silver, fiat money derives its value from the collective belief that it can be used for transactions and will hold purchasing power over time.