The Federal Reserve has clarified that its upcoming service for instant payments between organizations, known as the FedNow service, is not related to central bank digital currencies (CBDCs). The service is set to be launched at the end of July 2023, and the Federal Reserve ve has already invited 41 financial institutions, 15 service providers, and the US Treasury Department to participate in testing before the official launch.
In a tweet, the Federal Reserve emphasized that the FedNow service is simply a payment service provided for banks and credit unions to transfer funds for their customers. It is similar to other existing payment services such as Fedwire and FedACH, operating within the traditional fiat currency ecosystem. The Fed clarified that the service does not involve the issuance or use of CBDCs.
While the FedNow service promises instant fiat payments and real-time gross settlement (RTGS), it does not imply any connection to CBDCs. The Federal Reserve made it clear that the decision to issue a CBDC has not been finalized and will only be pursued if there are enabling laws in place. Currently, the service is focused on facilitating faster and more efficient fund transfers within the existing financial system.
The initial list of participants includes 41 financial institutions and 15 service providers, with plans to eventually include all 10,000 US financial institutions in the future. The integration of Metal Blockchain into the FedNow service was announced on May 11. Metal Blockchain is an encrypted network developed by Metallicus and based on a fork of the Avalanche code. The network's X-Chain subnet allows developers to set rules for asset transfers, giving them the ability to specify conditions for token issuance and transfers.
In summary, the FedNow service by the Federal Reserve is a payment service designed to enable instant payments between organizations. It is not connected to CBDCs and operates within the existing fiat currency ecosystem. The service will be tested by various financial institutions and service providers before its official launch in July 2023. The Federal Reserve has not yet decided to issue a CBDC and will only do so if there are appropriate legal frameworks in place. The integration of Metal Blockchain into the service adds further flexibility in asset transfers and token issuance.
