Will the Federal Reserve's launch of the FedNow service Crypto be in trouble?

Source: bitcoinist; compilation: Blockchain Knight

The U.S. Federal Reserve (Fed) has finally launched its much-anticipated FedNow service. According to a press release issued on July 20, the new instant payment system is live and will allow Americans to conduct quick and easy banking transactions at any time.

In March, the Fed announced plans to roll out the FedNow system in July and began authorizing bank participation in April. However, it's worth stating that the FedNow service has been in development since 2019.

Federal Reserve Chairman Jerome Powell said in a press release, “The FedNow service established by the Federal Reserve will help people make everyday payments faster and more conveniently in the coming years**. Over time, as more and more banks choose to use this new tool, individuals and businesses will benefit from it, including enabling individuals to receive wages immediately, or companies to receive funds immediately when they receive payment on invoices.”

The FedNow service will have 51 participants at launch, including 35 banks and credit unions and 16 service providers. Nonetheless, the Fed will seek to take on additional financial institutions for the remainder of 2023 and beyond.

Well-known companies such as Wells Fargo, JPMorgan Chase, BNY Mellon and the U.S. Treasury Department's Fiscal Service will all adopt the payment service when FedNow launches.

Ever since news of the Federal Reserve’s plans to launch FedNow broke in March, there has been speculation about its potential impact on crypto.

According to a recent report by Forbes, FedNow may indeed affect the use of digital assets such as stablecoins. However, it does not render these digital assets "obsolete" for some specific reason.

First, the report emphasizes that the FedNow system is based on existing payment channels and does not increase the dominance or influence of the U.S. dollar in global financial markets.

Additionally, Forbes noted that this new instant payment system lacks any on-chain application. As we all know, stablecoins and the DeFi field have a considerable correlation.

Finally, Forbes said that FedNow is limited to domestic payments and is unlikely to threaten the use of stablecoins in cross-border transactions.

According to another source, the Federal Reserve has come forward to clarify that its new instant payment system has nothing to do with CBDC (central bank digital currency).

The Federal Reserve stated in a tweet on July 19 that FedNow is only operating as a payment system for US financial institutions and is not intended to eliminate other payment systems including cash.

In providing more information on its CBDC plans, the U.S. central bank said that a CBDC would only be introduced if it is supported by “enabling laws.”

Recently, CBDCs have received a lot of attention, and many countries are exploring the use of these digital currencies.

According to the Atlantic Council CBDC Tracker, 130 countries around the world are currently developing or exploring CBDCs.