- The Federal Reserve’s FedNow will connect with Metal Blockchain, allowing users to instantly convert cash to stablecoin for use in DeFi protocols.
- FedNow is an instant payment system developed by the United States Federal Reserve, set to launch in July.
FedNow and Metal Blockchain Integration
In an announcement on May 11, the Metal Blockchain team revealed that the forthcoming instant payment service, FedNow, will be connected to Metal Blockchain. This integration will enable Metal users to instantly convert funds to stablecoin and back again using FedNow’s “send/receive” function. The collaboration between FedNow and Metal Blockchain highlights the increasing intersection between traditional financial systems and blockchain technology.
Metal Blockchain’s Compliance-Friendly Approach
Metal Blockchain, developed by Metallicus, is a crypto network built on a fork of Avalanche’s code. It was designed to provide compliance-friendly options for decentralized finance (DeFi) developers. The Metal developers emphasized that the network is constructed on the foundation of Bank Secrecy Act (BSA) Compliance, indicating its commitment to identity verification and Anti-Money Laundering (AML) measures.
Metal Blockchain features a subnet called “X-Chain,” which enables developers to implement rules for transferring assets. For instance, a token can be issued with specific restrictions, such as being transferable only to U.S. citizens or with a delay in trading until the following day. While the exact criteria for integration with FedNow remains unclear, Metal’s adherence to compliance standards likely contributed to its inclusion as one of the first blockchain networks listed as a FedNow service provider.
Metal Blockchain’s connection to FedNow opens up possibilities for the formation of interconnected “bank chains.” This allows for the creation of a more extensive blockchain ecosystem that ensures security and eliminates reliance on oracles. Banks can communicate with each other to facilitate payment processing and settlements while staying connected to the FedNow system.
Moreover, this integration prepares banks for the potential adoption of a central bank digital currency (CBDC) and the issuance of bank-issued stablecoins that can interact within a basket of stablecoin currencies.
Despite the potential benefits of FedNow and Metal Blockchain integration, some U.S. politicians, such as Florida Governor Ron DeSantis and U.S. presidential candidate Robert Kennedy, Jr., have expressed concerns about the privacy implications and view it as a stepping stone toward a blockchain-based CBDC. However, the Federal Reserve has explicitly denied any relationship between FedNow and a CBDC.
Marshall Hayner, the co-founder and CEO of Metallicus, dismissed the criticisms of CBDCs, stating that the same level of scrutiny applied to the traditional banking system would be extended to CBDCs. He believes that the controversy surrounding CBDCs is unfounded and emphasized that the integration of Metal Blockchain with FedNow will enhance the existing financial infrastructure, fostering secure and efficient payment processing between banks.
In conclusion, the connection between FedNow and Metal Blockchain presents an important development in the realm of instant payments and decentralized finance. This integration allows users to seamlessly convert between cash and stablecoins, paving the way for enhanced accessibility and efficiency within the financial ecosystem. The compliance-friendly approach of Metal Blockchain and the potential for interconnected “bank chains” demonstrate the ongoing convergence of traditional banking systems and blockchain technology, ultimately shaping the future of digital payments.