FedNow: US publishes controversial payment system
The US publishes a controversial payment system with FedNow. Critics suspect that it is secretly the advance of a CBDC. The lead central bank, the FED, rejects these points of criticism. In any case, there should not be a threat to cryptocurrencies.
US publishes controversial payment system
Yesterday, the USA published a payment system called FedNow, which is highly controversial, at least in the crypto scene. It is a service that allows the transfer of bank balances in real time.
Developments of this kind are currently all the rage – not least because classic transfers are becoming less and less attractive in the face of cryptocurrencies. Because the outdated systems are too slow and sometimes too expensive, FedNow will soon be supported everywhere in the USA.
As the US central bank FED explains in a press release , this requires cooperation with around 9,000 banks and financial institutions – but initially only 51 organizations are taking part in FedNow – including 35 banks and 16 payment service providers.
“The Federal Reserve developed the FedNow service to make daily payments faster and more convenient for years to come,” said Fed Chair Jerome Powell of the new product.
Registration for participation in the new payment system is open. FedNow will soon be available to the general public in the United States.
The aim of the service is to offer new opportunities to the economy by no longer delaying payments for hours or days. Money can be moved and used more quickly. Small companies in particular are seen as having an advantage.
It seems unlikely that it will be able to displace cryptocurrencies. Users can send cryptos like Bitcoin around the world regardless of country borders. FedNow, on the other hand, is limited to the USA.
In addition, the payment system uses the US dollar, which many crypto enthusiasts firmly oppose. The service will not introduce its own digital currency, which says goodbye to the fiat standard by covering it – the IMF recently called for such a product in the fight against crypto.
US Secretly Introducing CBDC? FedNow controversy explained
Is the US secretly introducing a CBDC with FedNow? That’s what critics of the new payment service suspect. However, the US Federal Reserve publicly denies that this is a digital central bank currency.
In addition to the fact that no new digital currency will be created, other points would also support this way of presentation. Many users questioned the central bank if FedNow is a CBDC and if the system is designed to replace cash in the US.
The central bank responded with a public statement. On Twitter they write:
The FED has made no decision to issue a CBDC and would only do so through an approving law.
Instead, it is said that it is a simple payment system that can be compared with a number of other services. So there is no major innovation. Rather, FedNow simply uses the latest technology to make payments more convenient and faster.
It is like other Federal Reserve Bank payment services. FedNow is not a currency, nor is it a step towards eliminating any other currency, including cash.
However, some observers see things differently. Bitcoiner Balaji Srinivasan expressly warns of the new system. According to his knowledge, it equips the Fed with special rights and raises the bank to the decisive central authority that can determine everything within FedNow.
FedNow is highly centralized. It’s an instant payment system, with each payment going through a Fed-controlled server and “must comply with applicable controls.”
The fact that FedNow is intended to be used by authorities without using a middleman is particularly revealing. Government authorities should therefore have the opportunity to withdraw funds at will.
