What exactly is FedNow? A Crypto Threat?

What exactly is FedNow? A Crypto Threat? 


  • More Fed shenanigans
  • Is it time for a CBDC backed by the federal government

FedNow launched mere days following Ripple's decision. Among the hypotheses were concerns about the possible effect on cryptocurrency.

The Federal Reserve Bank of the United States (Fed) has formally launched FedNow, an immediate payment system that enables US individuals to transmit payments in seconds.

FedNow links banks, allowing for immediate payments across bank accounts and minimising transactional delays associated with older systems. Customers are limited to $500,000 in credit transactions to guarantee safe and efficient transactions.

During the first phase, however, the transaction limit will be set at $100,000.

More Fed shenanigans?

Metal Blockchain is the underlying technology used by the new service, which is governed by the Fed. Metal Blockchain is a fork of Avalanche code with a subnet named X-Chain that allows smart contracts to be executed, increasing the flexibility and complexity of its services.

35 banks and 16 service providers have joined the Fed's new payment service's first launch. JPMorgan Chase, BNY Mellon, Wells Fargo Bank, and Peoples Bank are just a few examples.

FedNow participants will benefit from rapid money transfers and 24-hour access to the payment system, including on weekends when conventional means are closed.

Concerns are expressed by crypto members after the debut of FedNow.

Many people are concerned that it may weaken cryptocurrencies. Experts, however, claim that FedNow has no connection to cryptocurrencies or tokens. The system's main purpose is to improve the speed and efficiency of domestic transactions conducted via conventional financial channels.

FedNOW is aimed to speed up domestic transactions by providing real-time settlement capabilities. This characteristic distinguishes the system from Ripple and stablecoins by focusing on international settlement services.

FedNow is especially beneficial for people with fixed incomes or who live on a monthly basis. It is designed to prevent unnecessary fees and interest on loans, ensuring that payments are paid quickly after receiving paychecks. Small companies also benefit rapid access to debit card payments, allowing them to manage expenses more effectively and thrive.

Indeed, the introduction of FedNow will have an effect on intermediary services, as money may take several days to clear between banks.

Furthermore, although FedNow provides a payment experience comparable to cryptocurrencies, it lacks the basic properties and characteristics of cryptocurrencies, such as decentralisation, censorship resistance, and independence from third-party control.

FedNow was initially authorised by the Fed Board of Directors in August 2019. At the time, the system's rollout throughout the nation was planned over the following five years (2023). Following the publication of this news, Bitcoin's price fell somewhat, dipping below the $29,700 mark.

Is it time for a CBDC backed by the federal government?

FedNow's introduction has aroused conflicting rumours regarding its relationship with Central Bank Digital Currency (CBDC). However, the Fed has said unequivocally that FedNow is unrelated to CBDC and that no plans for a CBDC are in the works.

CBDCs have been a hot issue in recent years, with numerous governments actively investigating and building their own digital currencies. China is at the front of the pack, having made tremendous progress with its CBDC, the digital yuan.

The digital yuan is expanding, with efforts concentrated on locations like as Hong Kong and Macau. Furthermore, other major Chinese tourist locations, such as South Korea's Myeongdong District, have showed strong interest in allowing digital yuan payments.

The Bank of China Hong Kong is boosting its capacity to redeem digital yuan in anticipation of greater cross-border spending. During the annual high tourist season in July and August, several Hong Kong businesses are modernising their debt collection systems to provide e-CNY payment services to travellers.

For the time being, FedNOW is a game-changing effort aimed to enhancing domestic payment procedures using Metal Blockchain technology. While CBDCs are not now included in FedNOW, they may be added in the future.


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