The Federal Reserve of the United States has confirmed the launch date in July of its long-awaited instant payment systemconsidered by some as an alternative to central bank digital currencies and stablecoins.
The instant payment network will settle payments in seconds and will be able to transact between consumers, merchants and banks. It is not based on blockchain technology.
It is an important step for the government, since it is controlled by the Federal Reserve. The Clearing House RTP network, which also offers real-time payments, is managed by a consortium of large banks.
@federalreserve @frbservices announce July launch for the FedNow Service: https://t.co/a7kPqxkS7Q
—Federal Reserve (@federalreserve) March 15, 2023
@federalreserve @frbservices announces the July launch of the FedNow service: https://t.co/a7kPqxkS7Q
According to a March 15 announcement, the US Federal Reserve said that the debut of FedNow is scheduled for July; the US Treasury and a “diverse mix of financial institutions of all sizes” are ready to use the network at launch.
The Fed said it will “begin formal certification of participants” during the first week of April. to prepare for launch.
“Early adopters will complete a customer testing and certification program, informed by feedback from the FedNow Pilot Programto prepare to send live transactions through the system,” the announcement reads.
FedNow was announced in 2019 and will provide 24-hour real-time gross settlement, funneling money from a commercial bank from a sender through a Fed credit account to its recipient. It also incorporates functions such as fraud risk management.
if you like bank runs in the age of social media you’re going to love bank runs in the age of fednow
— nic carter (@nic__carter) March 12, 2023
if you like bank runs in the age of social media, you’re going to love bank runs in the age of fednow
After the official launch, the Federal Reserve said it will strive to incorporate as many financial institutions as possible in order to increase the availability of instant payments.
“The launch reflects an important milestone on the journey to help financial institutions meet customers’ needs for instant payments to better support nearly every aspect of our economy,” Tom Barkin said in the announcement.President of the Federal Reserve Bank of Richmond and Executive Sponsor of the FedNow Program.
The FedNow service is seen by some as addressing a problem that both stablecoins and CBDCs are also trying to solve..
The FedNow program, however, does not use blockchain technology, while the Federal Reserve is known for taking a cautious and skeptical view on stablecoins..
One of the major bank payment rails servicing US cryptocurrencies, the Silvergate Exchange Network (SEN), shut down earlier this month. after the bankruptcy of Silvergate.
SEN’s competitor Signature Bank’s SigNet remains operational despite the bank’s forced closure on March 13. However, its fate is up in the air, and several companies have fled the network after Signature’s problems.
Exactly.
Silverbank had Silvergate Exchange Network.
Signature had Signet.Both were private networks for companies to transfer value between each other using digital assets. Where are both now?
These companies enabled alternative currencies that threaten a CBDC and FedNow.
— Damon Nam (@damonnam) March 15, 2023
Exactly. Silverbank had the Silvergate Exchange Network. Signature had Signet.
Both were private networks for companies to transfer value to each other using digital assets. Where are both now?
These companies enabled altcoins that threaten a CBDC and FedNow.
The Vice President of the Federal Reserve, Lael Brainard, stressed during a House Financial Services Committee hearing in May that a CBDC would take much longer to get off the ground than FedNow due to regulatory hurdles..
“If Congress decided to issue a central bank digital currency, it could take five years for safety and design requirements to be established,” said.
He added that, however, FedNow will perform many of the same functions as a CBDC.
Fed Chairman, Jerome Powell also spoke before the House Committee on Financial Services on March 9 and suggested that a potential American CBDC is still quite some way off..
“We are not at the stage of making any real decisions,” he said, adding that “what we are doing is experimenting in a kind of initial phase of experimentation. How would it work? Works? What is the best technology? Which is the most efficient?
However, commenting on FedNow, he stated that “we will have real-time payments in this country very, very soon”.
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