Mar 16, 2023
FedNow Launching in July: Alternative to CBDCs and Stablecoins
The Federal Reserve has confirmed that its new instant payments system, FedNow, will officially launch in July. The system is seen by some as an alternative to central bank digital currencies and stablecoins, and could potentially revolutionize the way payments are made in the US.
FedNow will settle payments in seconds and can support transactions between consumers, merchants, and banks. It does not rely on blockchain technology, and is instead controlled by the Federal Reserve. It is a significant step forward for the government, as the Clearing House’s RTP network, which also offers real-time payments, is operated by a consortium of large banks.
The Fed has said that it will begin the formal certification of participants during the first week of April in preparation for the launch. Early adopters will complete a customer testing and certification program, informed by feedback from the FedNow Pilot Program, to prepare for sending live transactions through the system.
FedNow was announced in 2019 and will provide round-the-clock, real-time gross settlement by funneling commercial bank money from a sender through a Fed credit account to its recipient. It also has built in features such as fraud risk management.
Following the official launch, the Federal Reserve outlined that it will push to onboard as many as financial institutions as possible in order to increase the availability of instant payments.
The FedNow program is seen by some as tackling a problem that both stablecoins and CBDCs also seek to solve. However, unlike these options, the FedNow service does not use blockchain technology. Federal Reserve Vice Chair Lael Brainard has emphasized that a CBDC would take far longer to get off the ground than FedNow due to regulatory hurdles.
The FedNow system could also stand in place of a central-bank-issued digital currency. Fed chair Jerome Powell has suggested that a potential U.S. CBDC is still quite some time away, but that “we’ll have real-time payments in this country very, very soon.”
The launch of FedNow could have a major impact on the web3 space, as it could provide a much-needed alternative to existing payment rails. The Silvergate Exchange Network (SEN) was shut down earlier this month following Silvergate’s collapse, and while SigNet from Signature Bank is still operational, its fate is uncertain.
FedNow could offer a reliable and secure payment system for companies and individuals looking to transfer value using digital assets. It could also revolutionize NFT marketing and promotion, as well as provide a secure platform for selling NFTs.
The launch of FedNow could be a major step forward for the web3 space, as it could provide a much-needed alternative to existing payment rails. It could also revolutionize NFT marketing and promotion, as well as provide a secure platform for selling NFTs. With its launch just around the corner, it will be interesting to see the impact it has on the crypto and web3 space.
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