Do something new with the old. With another major banking crisis triggered by a sharp increase in key rates, does the US Federal Reserve (Fed) feel that the situation is turning against it? In any case, US central banks have announced that they want to launch an instant digital payment service next summer: FedNow.
Fast and low-cost crypto transactions worries the Fed
Most central banks across the planet don’t really like Bitcoin (BTC) as it stands in the way and competes with their respective precious central bank digital currency (MNBC).
While waiting for a digital dollar under its control, the US Federal Reserve is wasting no time in responding to the growing threat of cryptocurrency adoption. Thus, he has already announced the first step in the fluidization of digital transactions. In a press release published on March 15, 2023, the central bank unveils its upcoming FedNow service.
“(…) FedNow is designed to make it easier for financial institutions to access instant payment services across the country (…) 24 hours a day, every day of the year. Through financial institutions participating in the FedNow service, businesses and individuals will be able to send and receive instant payments at any time of the day, and recipients will have immediate full access to funds, giving them greater flexibility in managing their money and making urgent payments. »
Excerpt from Federal Reserve press release on FedNow
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FedNow: instant payments, but always under the full control of the bankers
From the “first week of April”, the FedNow service will enter the official member certification phase to launch the service in July 2023. However, as of that date, only the US Treasury and selected financial institutions will be able to use the new instant transaction service.
However, some observers, especially, of course, from the side of cryptocurrencies, note that the same disadvantages inherent in fiat currencies should be expected. The fact that these banking operations are fast and can (finally!) be carried out 24 hours a day, 365 days a year, in no way removes the problems of centralization and the following intermediary role (non-exhaustive list):
- Unlimited money supply: Central banks can run the printing press at will, creating inflation (in other words: the depreciation of their fiat currency);
- Opaque and centralized monetary policy in very few hands. The rate hike threats by Jerome Powell (Fed Chairman) on Tuesday, March 7th likely (in themselves) have a lot to do with the Silicon Valley Bank (SVB) in-flight explosion;
- The risk of arbitrary seizure or censorship of transactions and accounts, such as the Freedom Convoy protesters in Canada in early 2022;
- Privacy is at risk due to the ability to track all these banking transactions.
The FedNow service, a kind of prototype for the future MNBC, will demonstrate that the problematic imperfections of the fiat system (based on exclusive trust in issuing banks and governments) will persist. Because any intermediary between the sender and recipient of a transaction creates additional risk, especially if, as in this case, he can completely turn off the transaction tap.
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