Payment service US Federal Reserve: Fednow is live

The US Federal Reserve (Fed) has gone live with its payment service FedNow. Is this preparation for a U.S. CBDC?

As recently as March of this year, Federal Reserve Chairman Jerome Powell declared that the U.S. was still a long way from a central bank digital currency (CBDC). However, the Federal Reserve (Fed) has now gone live with its small subsidiary: FedNow.

The Fed announced this, Thursday, July 20, via a press release. It read, "Banks and credit unions of all sizes can sign up and use this tool to transfer money directly to their customers any time of day, any day of the year."

Fed Chairman Powell expressed optimism: "The Federal Reserve has developed the FedNow service to make everyday payments faster and easier in the coming years". He added: "Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will be great. For example, an individual may receive an instant paycheck or a business may have instant access to funds when paying an invoice."

Initially, the payment service, also called "CBDC light" in the crypto space, will be available to 35 selected banks and credit unions, as well as the Bureau of the Fiscal Service, an agency under the Treasury Department. However, there are plans to expand FedNow to 9,000 banks and credit unions operating in the US. It has not yet been announced when this will happen.

FedNow is similar to PayPal, but processes transactions in seconds and at a low cost: from 0.01 to one US dollar, depending on the sender and the purpose. The payment service uses an international standard for digital payments, which is also used by cryptoprojects such as Ripple or Stellar. Moreover, the service is available 24/7.