The Federal Reserve Board in the US announced a “new round-the-clock real-time payment and settlement service”, called FedNow. FedNow will be supported in the US to provide a safe and efficient system.
The Board of Governors of the Reserve not only decided to introduce a new system but also planned to re-design the existing system. It plans to improve liquidity management and provide 24X7X365 service with Fedwire as well.
The press release cited that the Reserve already serves over 10,000 financial institutions in the US. Moreover, it has provided payment and settlement services, since its founding about 100 years ago. It noted that,
That reach will help the FedNow Service support a nationwide infrastructure on which the financial services industry may develop innovative faster payment services for the benefit of all Americans.
The Federal Reserve plans to invest in this new system promote the integrity of the service and induce cost-effectiveness. It further plans “to achieve full recovery of costs over the long run.” The payment system will be released sometime during 2023-2014.
Furthermore, it also emphasized the importance of the new ‘liquidity management tool’ which will enable faster settlements. Lael Brainard, the Federal Reserve Board Governor, noted,
“FedNow will permit banks of every size in every community across the country to provide real-time payments to their customers.”
While Blockchain and crypto were not referenced to, this move surely seems to be influenced by the recent developments in the cryptocurrency space. Facebook’s Libra Senate Hearing went on for almost 10 hours on two days, where the two Senate Committees decided to put a stop to it.
US Senator, Elizabeth Warren tweeted about the recent developments saying,
I’m glad the FederalReserve has finally taken action so working families & small business owners don’t have to wait up to 5 days to get paid & pay their bills. I look forward to working with the Fed to ensure this system is implemented swiftly & smoothly.
Will it Implement Blockchain?
The integrity solution and liquidity tool do seem to point to the implementation of Blockchain. However, technologically there are other possibilities as well, similar to the UPI payment system implemented in India. The European Central Bank, Banco de México, and the Reserve Bank of Australia have also looked to enabled payment-by-payment, real-time settlement of retail payments.
Nevertheless, the timelines of the new system have also been extended to more than 3-4 years from now. Hence, specific details can only be expected sometime later from now.
What effects will announcement have on the existing cryptocurrency markets? Please share your views with us.
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Nivesh from Engineering Background is a full-time Crypto Journalist at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com