The U.S. Federal Reserve (Fed) has finally launched the much-anticipated FedNow service. According to a press release by the American apex bank on July 20, the modern instant payment system is live. It will enable Americans to conduct speedy bank transactions anytime, any day of the year.
In March, the Fed announced its intention to introduce the FedNow system by July and soon began authorizing banks for participation in April. However, it is worth stating that the FedNow service has developed since 2019.
Chair of The Federal Reserve Jerome H. Powell stated the following in the press release:
The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient.
Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid.
The FedNow service will launch with 51 participants consisting of 35 banks and credit unions and 16 service providers. Albeit, the Federal Reserve will be looking to onboard more financial institutions in the remainder of 2023 and beyond.
Examples of prominent names set to adopt this payment service upon launch include Wells Fargo Bank, JP Morgan Chase, Bank of New York Mellon, and the U.S. Department of the Treasury’s Bureau of the Fiscal Service.
Related Reading: CBDC Ban: Florida Governor Opposes Federal Issuance Of Digital Currency
Could FedNow Negatively Affect The Crypto Market?
Since news broke out in March on the planned introduction of FedNow, speculation has existed on its potential effects on the crypto space.
According to a recent report by Forbes, FedNow may indeed impact the use of cryptocurrencies such as stablecoins. Still, it will not cause these digital assets to go “obsolete” for specific reasons.
Firstly, the report highlights that the FedNow system is based on existing payment rails and will not increase the dominance or reach of the U.S. dollar in the global financial markets.
Moreover, Forbes also noted that this new instant payment system lacks any on-chain applications, favoring stablecoins that are known to be quite relevant in the DeFi space.
Finally, Forbes stated that FedNow is restricted to domestic payments and would likely not threaten the use of stablecoins in cross-border transactions.
FedNow Not Related To CBDCs – U.S. Fed
In other news, the Federal Reserve has come out to clarify that its new instant payment system has no relation to a central bank digital currency (CBDC).
In a tweet on July 19, the Fed stated that FedNow only operates as a payment system for U.S. financial institutions and is not designed to stamp out other payment systems, including cash.
Providing more information on its plan for a CBDC, the American central bank stated it would only introduce one with the backing of “an authorizing law.”
CBDCs have received much attention recently, with many countries exploring using these digital currencies. According to data from the Atlantic Council CBDC tracker, there are currently 130 countries worldwide involved in one stage of CBDC development or the other.
