The first participants in the new government-run payments system, which is frequently touted as a defense against the necessity for crypto's payment innovations, will be accredited within weeks.
According to a statement released by the U.S. Federal Reserve on Wednesday, the long-awaited real-time payments system will be activated in July, which some have interpreted as a government challenge to the advantages of instantaneous transactions offered by the cryptocurrency industry.
Beginning at the start of the following month, the FedNow Service will start certifying its initial participants in an effort to reduce the current delays in clearing financial transactions between institutions. The system will run continuously and offer complete, quick access to funds.
Ken Montgomery, the chief operating officer at the Federal Reserve Bank of Boston, has been working on the new system he said will offer a "modern instant payment solution." "We urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service," Montgomery said.
The FedNow service has been viewed as a potential forerunner of a central bank digital currency (CBDC), but it also has the potential to weaken one of the main benefits of a digital dollar: the speed of transfers. Federal Reserve officials have stated that the organization has not taken any decisions regarding a potential U.S. CBDC, which they claim would require the backing of Congress, the Biden administration, and the general public.
A real-time payment network is required, according to federal officials like Fed Chair Jerome Powell, then-Fed Governor Lael Brainard, and former Federal Trade Commission Commissioner Rohit Chopra, who is now the director of the Consumer Financial Protection Bureau. Concerns about the proliferation of specific private stablecoins, such as the since-shuttered Diem (formerly Libra) project, have also been raised.
As a mechanism for users to "fund and cash out of trades without having to leave cash or digital dollars on a trading platform," Jaret Seiberg, an analyst at TD Cowen, claimed the system would actually be useful to cryptocurrency investors in a client note on Wednesday.
The banking sector previously created its own RTP network, so the Fed's new system for transactions won't be the first. Since 2017, that comparable, independent competitor has been in operation.