- FedNow, a centralized payment system by the US Federal Reserve, promises instant, irreversible, and low-cost USD settlements 24/7.
- Scheduled to launch in July 2023, the system aims to outcompete most digital assets, including stablecoins, Ripple (XRP) and Stellar (XLM).
The US Federal Reserve has developed FedNow to offer faster, cheaper, and more efficient USD settlement between financial institutions. Operating 24/7 and equipped with a full-featured back-office suite, FedNow aims to outperform traditional interbank settlement systems like FedWire or ACH systems in terms of cost, scalability, features, and intraday finality. The system is poised to render the need for a US CBDC almost obsolete.
FedNow enables instant USD settlement on a peer-to-peer (P2P), business-to-business (B2B), and business-to-consumer (B2C) basis for US residents when integrated with the majority of US financial institutions. By eliminating the typical “three to five business days” delay of legacy payment settlements, FedNow allows payees who rely on cash flows to access cleared funds on an intraday basis.
Though FedNow only serves customers in good standing with qualified US financial institutions, it will connect most US residents and many wealthy USD users abroad. As the world’s leading central bank, the Federal Reserve will use FedNow to facilitate electronic payments for hundreds of millions of people.
FedNow promises lower transaction costs compared to most blockchains. With a $25 monthly access fee and transaction fees of 4.5 cents per payment up to $100,000, the system eliminates all fiat-crypto fees, risks, and delays, making it a more affordable option than most public blockchains. Additionally, FedNow’s centralized database ensures scalability and nearly limitless transaction processing capacity.
Unlike many stablecoins, FedNow guarantees a stable dollar value without price fluctuations. The system also offers various fraud screening tools and future features, such as alias-based payments, API support, bulk payments, enhanced remittance services, and additional safety controls.
In conclusion, the Federal Reserve’s highly anticipated FedNow system, scheduled for release in July 2023, threatens to outcompete most digital assets, particularly stablecoins. By connecting hundreds of millions of people through a centralized system backed by the government, FedNow provides instant, irreversible, low-cost P2P, B2B, and B2C payments with high throughput and 24/7 availability. The imminent launch of FedNow may prompt many crypto projects to reassess their unique value propositions.