Instant payment service FedNow will be released in July 2023. Its main goal is to reduce the gap in payment time between financial institutions in the United States.
The U.S. Federal Reserve announced the launch of the instant payment system FedNow in July 2023. The network will make payments between consumers, merchants, and banks “in seconds.”
According to Tom Barkin, President of the Federal Reserve Bank of Richmond, the service will “help financial institutions serve customer needs for instant payments” and solve accessibility problems.
The Fed will “begin the formal certification of participants” during the first week of April in preparation for the service’s launch. For now, the service is in the last phase of testing with selected users and “financial institutions of all sizes.”
FedNow was announced in 2019. Its primary purpose is to provide real-time, round-the-clock settlements. The sender’s money held at a commercial bank would be redirected to the recipient through the Fed’s credit account system, which would manage fraud risks. The Fed officials also said that U.S. financial institutions’ participation in FedNow would be virtually mandatory.
Although FedNow won’t rely on blockchain, some users see it as an alternative to central bank digital currencies (CBDC). Regulatory officials don’t deny this state of affairs. For example, Lael Brainard, Vice Chair of the Fed, said last May that FedNow would perform the same functions as CBDCs. In her view, the service would replace the government’s digital currency as long as there are significant regulatory obstacles to its issuance.
Some Twitter users even saw FedNow’s upcoming launch as the root cause of repression against the crypto industry by the U.S. government. The crypto community views the recent forced shutdowns of crypto-friendly Silvergate Bank, Silicon Valley Bank, and Signature Bank as a “show of force,” calling the U.S. government’s actions controlled provocations.