I believe it will work like this.  There will be gateways for different currencies (crypto or fiat).  You send your currency to this gateway.  The gateway then issues the asset on the Nxt network via colored coins.  That asset is then transferable on Nxt.  You can have many different issuers of the same currency.  All these currencies will then be able to be traded in a decentralized manner.  To redeem your currency, you send it back to the asset issuer and they send you the crypto or the fiat.