FED ROLLS OUT INFRASTRUCTURE FOR CBDC- The Federal Reserve announced plans to launch their FedNow program, which promises to allow banking to happen instantaneously. The infrastructure has been built over the past three years. It is ostensibly being created to combat the threat of CBDs being used by competing monetary systems (like China), but others believe it is the first step towards the creation of a U.S.-government-backed CBDC.
From MENAFN
The launch of the Federal Reserve’s instant digital payment system, FedNow, is setting the stage for a potential shift to Central Bank Digital Currencies (cbdcs ) in the United States.
While FedNow is not a digital currency , it provides the necessary infrastructure for a future transition. This raises concerns about the broader implications of such a shift and its potential impact on society, the economy, and individual privacy.
The Federal Reserve outlines the features the initial launch will include:
Core clearing and settlement capabilities to support a range of transaction types and use cases
Use of the widely accepted ISO® 20022 standard and other industry best practices to support interoperability
Features that will support flexible adoption, including support for the use of service providers and correspondents and an option to enroll as a “receive-only” participant
Value-added features including request-for-payment capability and tools to support participants in their handling of payment inquiries, reconcilements and certain exceptions
Features to enhance experience for financial institutions by broadcasting participant availability to support their transition to 24x7x365 operations, a user interface to support data needs and the ability to have access to balance information on weekends
Features to support payment integrity and data security and tools to help financial institutions combat fraud, such as a transaction value limit and reporting features
A liquidity-management tool that will allow participants and others to transfer funds to each other to support the liquidity needs of instant payments
Others believe the FedNow program is intended to combat the Fintech sector (cryptocurrency) that already offers instant payment transfers. From Bloomberg:
Our thesis: US banks should be able to stave off some threats from the booming fintech sector under a new Fed real-time payments system set to go live in July, but FedNow, which only handles transfers of up to $500,000, likely won’t have dramatic effects on fintech industry players’ revenue either. Though it will compete with an existing real-time bank network, FedNow does offer banks the potential to diminish fintechs’ allure.
We have little doubt this tool is intended to fend off Fintech competition, create the infrastructure that ultimately supports a CBDC in as non-intrusive a way as possible, and create dependence on a service that will lead otherwise resistant banks to comply or die.
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