• The U.S. Federal Reserve has officially launched the new instant payment infrastructure, FedNow.
• Banks and credit unions can sign up to enable customers to make instant transfers at any hour of the day.
• FedNow is not related to a central bank digital currency (CBDC) and separate from it, the Biden Administration is exploring possibilities of using CBDCs for digital dollars.
U.S. Federal Reserve Launches New Instant Payment Service FedNow
The U.S. Federal Reserve has officially launched its new payments system, FedNow, enabling banks and credit unions to offer their customers instant money transfers at any hour of the day. The Treasury Department’s Bureau of the Fiscal Service and 35 early-adopting banks and credit unions already have access to these capabilities via the service’s infrastructure. Meanwhile, the Fed is committed to working with more than 9,000 banks and credit unions across the country in order for this service to be available for their customers over time.
FedNow Not Related To CBDC
The Fed clarified on Twitter that this new service is not related to a central bank digital currency (CBDC). This means that it’s not a step towards eliminating cash as suggested by some voices in the crypto world who expressed concerns that CBDCs could be used as instruments for government surveillance and financial control. Graham Steele, US Treasury’s Assistant Secretary for Financial Institutions acknowledged last month that CBDCs present significant user privacy challenges as well.
Biden Administration Exploring Possibilities Of Using CBDC For Digital Dollars
Separate from FedNow, Biden Administration is currently exploring possibilities of using CBDCs for issuing digital dollars but noted that such an implementation would require Congressional approval according to Federal Reserve Chair Jerome Powell’s testimony in March before House Financial Services Committee .
Early Adopters Of FedNow Infrastructure
As mentioned earlier, 35 early-adopting banks and credit unions have already gained access through the instant payment capabilities via FedNow infrastructure along with Treasury Department’s Bureau of Fiscal Service which has also become one of them now .
Privacy Challenges With CBDC Use
Although there are many advantages associated with implementing CBDC such as faster transfer speed or lesser transaction fees , there are still some security challenges when it comes into play , particularly concerning user privacy .