New Speculations Rise as US Federal Reserve Introduces FedNow Instant Payment Service

Source: FedNow website

The United States Federal Reserve recently released the FedNow Service system to facilitate instant payments; however, experts warn that the system could become a precursor to the infrastructure for a central bank digital currency (CBDC).

Launched on Thursday, July 20, the FedNow service aims to improve the movement of money in the US economy by offering various benefits to consumers and businesses. It will allow immediate access to paychecks, make last-minute bill payments easier, and expedite government payments to individuals.

“The Federal Reserve created the FedNow Service to help make everyday payments faster and more convenient for years to come.” saying Federal Reserve Chairman Jerome H. Powell.

“Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include allowing an individual to receive a paycheck immediately, or a business to instantly access funds when a bill is paid.”

While this may seem like a positive step, it aligns with a crucial goal of the digital asset industry: enabling fast and accessible money transfers at any time.

Crypto enthusiasts believe it is another way for the government to set the structure for government-issued CBDCs.

“This is a payment system, not a digital token or CBDC, but it is something that can be used to make it easier to create a CBDC,” said Jim Bianco, president of Bianco Research.

However, the Federal Reserve denied the notion that FedNow is linked to an underlying intent in the July 10 FAQ.

Exploring CBDC and the concerns surrounding FedNow in the United States

Although the United States has yet to adopt any central bank digital currency (CBDC), several initiatives have been explored, including the New York Federal Reserve’s 12-week program to test a simulated digital dollar, in the government’s interest in digital currency.

While Federal Reserve officials such as Fed Chair Jerome Powell and Fed Governor Michelle Bowman have been cautious about a digital dollar, or CBDC, it is worth noting that Fed officials have been actively studying the potential of a government-issued digital currency.

Fed Chairman Jerome Powell himself has repeatedly expressed support for exploring the idea.

With many cryptocurrency experts speculating that the creation of a CBDC could be the underlying intent behind FedNow, concerns have been raised about government control over a digital token, leading to censorship and permitting of transactions or specific individuals.

“If FedNow does indeed become a programmable CBDC, then theoretically it could be used to block payments for items the government does not favor or to exclude from the financial system people who are seen as threatening in some way to government authorities, i.e. political opponents,” said Dave Weisberger, CEO and co-founder of CoinRoutes.

Some banks They have also expressed skepticism about the FedNow system, criticizing its lack of leadership structure and clear business plan, since it is financed with taxpayer money.

Additionally, an unlikely alliance has emerged between traditional banks and blockchain enthusiasts, with both expressing skepticism towards FedNow.

“The problem, of course, is that the government is going to have to take action on the digital token, and be able to allow it and censor it for certain types of people in certain types of forms or certain types of transactions,” Bianco said.

The launch of FedNow has sparked debate, with some seeing it as a potential step toward an eventual central bank digital currency and cashless society, raising concerns about government access to every transaction and the potential for authoritarianism and abuse.