The U.S. Federal Reserve introduced FedNow, an instant money transfer service for banks and credit unions, enabling secure and real-time transactions at any time.
In a recent announcement on social media, the U.S. Federal Reserve introduced FedNow, a new service for instant money transfers that can be utilized by banks and credit unions. According to the tweet, FedNow will enable banks to transfer funds instantly and securely at any time of the day and any day of the year.
— Crypto Macro (@cryptomacro14) July 20, 2023
Federal Reserve Launches its Crypto Rival Project
The launch of FedNow marks the Federal Reserve’s foray into the world of instant payments and digital currency. The payment infrastructure supporting this new service involves 35 financial institutions and the U.S. Department of the Treasury’s Bureau of the Fiscal Service, as well as nearly 20 service providers. The aim is to provide convenient and efficient instant payment solutions to meet the growing demand from consumers.
The Federal Reserve is currently in negotiations with over 9,000 U.S. banks, seeking their participation in the FedNow network to expand its reach and enhance the benefits offered to retail and corporate customers across the country. This move by the Federal Reserve indicates its commitment to providing faster payment options within the traditional financial system without the need for cryptocurrencies.
In the past, the Federal Reserve, along with the banking sector and the SEC, expressed concerns about cryptocurrencies, warning about their potential use in illicit activities such as money laundering. Ripple, a cryptocurrency company that specifically targets collaboration with traditional financial institutions, has faced legal challenges in the form of a lawsuit initiated by the SEC.
However, the Federal Reserve has decided to create its own payments system, FedNow, to keep customers within the traditional financial system while offering faster transactions than remittance giants like Western Union and MoneyGram. This move aligns with the Federal Reserve’s ongoing exploration of a digital U.S. dollar, also known as the FedCoin, a central bank digital currency (CBDC).
Indirect Connection between FedNow and Ripple
The origins of FedNow can be traced back to early 2021 when Ripple customer Volante Technologies collaborated with the Federal Reserve to develop the instant payments service. FedNow operates on the ISO 20022-based network, which is also utilized by Ripple Labs. ACI Worldwide, another Ripple customer, has been working alongside the Federal Reserve since January 2021 to assist in the development of the payment system.
Overall, the launch of FedNow signifies the Federal Reserve’s entry into the world of instant payments, providing a secure, efficient, and faster alternative to traditional remittance services. By developing its own payment system, the Federal Reserve aims to create a seamless digital payment experience within the established financial system, while simultaneously exploring the potential for a central bank digital currency.
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