Fiduciary Media belongs to a particular theoretical distinction between money and substitutes. Mises first requires claims accepted as equivalent to money through confidence in immediate, costless redemption; he then separates full money backing from the portion above reserves. The term is not synonymous with all fiat money or any debt.
Mises starts from confidence that the claim can be converted into the relevant money at any time without delay or cost. Stating an amount on a document is insufficient. A claim due in several years or a doubtful promise therefore does not satisfy the condition merely by having a money denomination. [Mises — Human Action, XVII.11–12]
Our illustration of Mises’s distinction: an issuer has money substitutes of 100 and a corresponding money reserve of 60. The difference of 40 is Fiduciary Media in this classification; the covered 60 corresponds to money certificates. The example assumes the same unit, defined liabilities and usable reserves; it is not a regulatory calculation. [Mises — Human Action, XVII.11–12]
Mises notes that one deposit or banknote usually cannot reveal which part of the total is covered. The distinction requires information on aggregate claims and reserves. The number on an individual document or its graphic design therefore does not show the issuer’s backing ratio. [Mises — Human Action, XVII.11–12]
In The Theory of Money and Credit, Mises describes bank issuance as a liability against which loans or other business investments may stand. These assets are not automatically a reserve of money proper. Distinguish missing immediate money backing from a claim that the entire balance sheet has no value. [Mises — The Two Ways of Issuing Fiduciary Media]
Bank of England distinguishes rapid withdrawals against long-term loans from the risk of borrower nonpayment. An asset can have value without being immediately convertible into cash; it may also later suffer a loss. Total assets alone, without maturities and quality, do not answer whether immediate withdrawal is possible. [Bank of England — Money creation in the modern economy]
Bank of England explains how more stable or term liabilities reduce sudden-withdrawal risk. Our comparison with Mises: a claim with a later maturity cannot simply be classified with immediately redeemable claims. Actual settlement possibilities matter, not just the account’s commercial label. [Bank of England — Money creation in the modern economy] [Mises — Human Action, XVII.11–12]
Mises distinguishes a money substitute from a doubtful claim traded at a discount after redemption fails. Calling all irredeemable money Fiduciary Media is inaccurate. Specify what the claim should be redeemable for and whether people actually accept its equivalence. [Mises — Human Action, XVII.11–12]
Nakamoto’s system verifies spending BTC without requiring a particular issuer’s promise to pay something else. A balance at a service, by contrast, can be a claim against it. This is our application of the historical distinction: before calling it Fiduciary Media, verify the claim, withdrawal terms, total liabilities and reserves; displaying BTC alone is insufficient. [Nakamoto — Bitcoin: A Peer-to-Peer Electronic Cash System] [Mises — Human Action, XVII.11–12]
For the clearest picture, read this entry together with Credit Expansion, Credit risk, Fiat money, Counterparty risk, Cashu. The reverse links also lead from Credit Expansion, Regression Theorem, Commodity Money, Free Banking.