With the emergence of the FedNow payment system, the need for a digital dollar is now being pushed back to the sidelines by the Fed leaders.
The United States Federal Reserve has announced that its long-awaited FedNow Instant Payment system is set to go live in July. In the details shared to capture its preparations for launch, the apex banking regulator said the vetting process through formal certification of participants will kickstart at the beginning of April.
The FedNow is the government’s noted solution to the innovations being embodied by both stablecoins and Central Bank Digital Currencies (CBDCs). Though billed to still be controlled by the Federal Reserve, it will offer the fastest funds moment between citizens and even financial services providers.
There has been a major drudgery in the general banking and payment ecosystem as it concerns the cost and speed of settlements. Stablecoins and crypto were projected to solve this and has worked fine but regulators are generally skeptical about them. With FedNow, the Federal Reserve can now provide a viable and government-backed payment system to serve everyone.
“We couldn’t be more excited about the forthcoming FedNow launch, which will enable every participating financial institution, the smallest to the largest and from all corners of the country, to offer a modern instant payment solution,” said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive. “With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service.”
According to the announcement, following the April certifications, the certified participants will conduct production validation activities to confirm readiness for the July launch. The system has to be working optimally in terms of both the payment and transaction systems as well as all security features to prevent any form of glitch.
FedNow Payment and the Digital Dollar Pursuit
With the emergence of the FedNow payment system, the need for a digital dollar is now being pushed back to the sidelines by the Fed leaders. Federal Reserve Vice Chairman, Lael Brainard emphasized before a House Committee on Financial Services Hearing back in May that the Digital Dollar will take a much longer time to get off the ground than the FedNow system per the regulatory hurdles surrounding it.
“[If] Congress were to decide… to issue a central bank digital currency, it could take five years to put in place the requisite security features, the design features,” she said.
This position is also being confirmed by Jerome Powell, the Federal Reserve Chairman who noted that the bulk of the work involving the Digital Dollar is speculative for now.
“We’re not at the stage of making any real decisions,” he said, adding that “what we’re doing is experimenting in kind of early stage experimentation. How would this work? Does it work? What’s the best technology? What’s the most efficient?”
As the Fed leaders have reiterated, the FedNow payment system will suffice for now.
Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.
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