The US Federal Reserve recently launched the long-anticipated FedNow Service. According to the Fed, this tool can be used by banks and credit unions of all sizes to facilitate instant money transfers for their customers, 24/7, 365 days a year. With 35 users onboard already including early-adopting financial institutions and certain departments of the US Treasury, it seems like a step in the right direction.
However, this development begs the question if it might diminish one of the central selling points of cryptocurrencies, such as Bitcoin, Litecoin, and Ethereum, known for their instant, round-the-clock payment methods, streamlined in contrast to the more traditional, and sometimes slow-moving, banking systems.
Still, it’s worth noting that instant payments are but one aspect of the allure of cryptocurrencies. Another crucial feature of these digital assets is their decentralization – no single point of failure, no single entity that might manipulate the system for self-interest or stifle those they have an issue with. This contrasts sharply with the traditional finance sphere where services such as FedNow exist and where bank accounts and transactions sometimes suffer from arbitrary closures and censorship.
On top of this, blockchain platforms, the technological backbone of many cryptocurrencies, boast complete transparency, something severely lacking in the traditional banking sector.
However, increased centralization tales another twist as critics regard the FedNow service as a stepping-stone towards a Central Bank Digital Currency (CBDC). The idea of a CBDC controlled by the government brings a shudder to many proponents of crypto and freedom, as a government-issued digital currency could, theoretically, be used to manipulate citizens’ lives in pursuit of political objectives. Crypto influencer and Bitcoin maximalist Layah Heilpern voiced her concern over this on Twitter, adding to the uncertainty.
In response to the speculation, the US Federal Reserve insisted that the new service does not constitute a move towards digital currency, nor is it aimed at eliminating existing forms of payment. Regardless, it’s hard to ignore the fact that the US Treasury is studying the concept of a CBDC, as recently reiterated by Treasury Secretary Janet Yellen. Yet, it’s plausible that the proposition may meet resistance from Congress, as a joint bill to disable the Fed from issuing a CBDC was introduced earlier this year.
From one perspective, the launch of FedNow could be seen as a success for cryptocurrencies, effectively co-opting their instant payment capabilities. However, it also ignites pressing questions on the future of banking and digital finance in an increasingly centralized system.
Source: Cryptonews
