The Federal Reserve of the United States has clarified that its new service for inter-organizational instant payments, known as the FedNow Service, bears no affiliation with central bank digital currencies (CBDCs). With a launch date slated for July 2023, the FedNow Service has already been tested by 41 financial institutions, 15 service providers, and the U.S. Department of the Treasury. Despite this steady progress, the Federal Reserve felt compelled to explain that the promise of real-time gross settlements and instant fiat payments facilitated by this system is not fueled by any form of CBDC. FedNow Service is, in fact, akin to other payment services like FedACH and Fedwire, completely confined within the realm of the fiat ecosystem.
Despite the prevailing buzz around CBDCs, the Federal Reserve has not yet committed to issuing a CBDC, making it clear that it would proceed with CBDC issuance only with the backing of an authorizing law. The Federal Reserve’s plans for the future include the onboarding of all 10,000 U.S. financial institutions.
In a broader context, such developments represent one side of the coin in the larger conversation about central banks’ engagement with blockchain technology. On one hand, such engagement is seen as an affirmation of blockchain’s potential to revolutionize finance. On the other hand, skeptics may view the Federal Reserve’s clear distinction between their instant payment services and CBDCs as a sign of hesitance, perhaps even resistance, towards fully embracing the world of digital currencies.
Interestingly, the ongoing experiment with the FedNow Service did lead to the integration of Metal Blockchain, a crypto network developed by Metallicus, signalling an incidental connect between the Federal Reserve’s non-CBDC instant payment service and the crypto universe. Yet, whether this unintended overlap will result in a shift in the Federal Reserve’s stance on CBDCs, only time will tell. For now, while CBDCs continue to command global attention, the U.S. Federal Reserve remains firmly rooted in the fiat ecosystem, consciously distancing its initiatives from the digital currency arena.
Source: Cointelegraph
