The Fed clears the air about the link between CBDCs and FedNow Service.
The US Federal Reserve (Fed) has recently shed light on its new FedNow Service, a real-time institutional payment platform, underscoring that this service does not fall under the umbrella of central bank digital currencies (CBDCs).
Having successfully integrated 41 financial organizations, 15 service vendors, and the US Department of the Treasury into the initial testing phase, the FedNow Service has been declared "ready" for launch at the end of July 2023.
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Despite FedNow Service's focus on facilitating instant fiat transactions and real-time gross settlement (RTGS), the Federal Reserve has made it clear that the new service is not powered by CBDC.
Federal Reserve took to Twitter to reveal that the upcoming FedNow Service is similar to payment mechanisms like Fedwire and FedACH. The Federal Reserve has emphasized:
The FedNow Service is not related to a digital currency. The FedNow Service is a payment service the Federal Reserve is making available for banks and credit unions to transfer funds for their customers.
As for the speculated CBDC, the Federal Reserve clarified that a decision is yet to be made. Furthermore, the Federal Reserve emphasized that it "would only proceed with the issuance of a CBDC with an authorizing law."
The Federal Reserve has outlined an ambitious plan to gradually bring on board all of the 10,000 financial institutions in the US to its FedNow Service. As of July 20th, the institutions that have completed FedNow certification include BNY Mellon, JPMorgan Chase, Peoples Bank, US Bank, and Community Banker's Bank.
An intriguing aspect of the FedNow Service is its planned integration with Metal Blockchain. This unique crypto network, a product of Metallicus and based on a modification of Avalanche's code, features an "X-Chain" subnet, allowing developers to devise specific rules for asset transfers.
The US Federal Reserve has confirmed that its upcoming FedNow Service, designed to provide real-time payment solutions, does not involve CBDCs. While it is exploring the world of blockchain through its partnership with Metal Blockchain, the decision to issue a CBDC remains pending and would require legislative approval.
At the end of June, the US Federal Reserve Board reportedly recognized stablecoins as a type of currency.
