Home Technology CBDC Alternative FedNow will launch next summer

CBDC Alternative FedNow will launch next summer

CBDC Alternative FedNow will launch next summer

Key points to remember

  • Federal Reserve Vice Chairman Lael Brainard announced today that FedNow is expected to launch between May and July 2023.
  • FedNow is the Federal Reserve’s instant payment service; it will allow households, businesses and financial institutions to settle transactions at any time of the day.
  • Federal Reserve Governor Michelle Bowman thinks FedNow solves some problems that a CBDC would solve.

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The US Federal Reserve announces that it will introduce its instant payments service, FedNow, by next summer.

FedNow is expected to launch next year

The Federal Reserve is preparing to launch FedNow, a new payment facilitation system that could alleviate the need for a central bank digital currency.

Lael Brainard, Vice Chairman of the Federal Reserve, announcement today that the FedNow service is expected to go live between May and July 2023. Brainard also said the system will undergo technical testing beginning in September.

The news was revealed Aug. 29 at an Early Adopter Workshop in Rosemont, Illinois via webcast.

During today’s workshop, Brainard called on financial institutions and software vendors in the United States to update their systems in preparation for the launch of the new service.

“Moving to real-time payment infrastructure requires focused effort, but change is inevitable,” Brainard said. “Now is the time for all key stakeholders…to dedicate the necessary resources to support instant payments.”

Initiatives such as a pilot program, the FedNow Explorer resource, the FedNow Community, and the FedNow Early Adopter Workshop are expected to increase engagement.

According to Federal ReserveFedNow is an instant payment system that offers real-time transactions between households, businesses, and financial institutions in the United States.

Brainard noted that the service is built with cloud technology, allowing the payment system to scale without sacrificing resiliency. This scalability capability applies to system throughput as well as geographic coverage, ensuring continuous service even in remote areas.

FedNow payment flow. Source: The Federal Reserve

FedNow is notable in the crypto industry as it has been touted as an alternative to a central bank digital currency (CBDC). In particular, Federal Reserve Governor Michelle Bowman declared on August 17 that FedNow “addresses the concerns that some have raised regarding the need for a CDBC”.

Brainard, meanwhile, has noted that launching a CBDC would require Congressional approval and take at least five years to design and implement. As such, FedNow will almost certainly precede the completion of all CBDC efforts in the United States.

Disclosure: At the time of writing this article, the author of this feature owned ETH and several other cryptocurrencies.

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