The Federal Reserve is preparing to introduce FedNow, a new payment facilitation system that may reduce the need for a central bank digital currency.
Vice Chair of the Federal Reserve Lael Brainard revealed today that the FedNow Service is planned to become active between May and July of 2023. Brainard said that technical testing of the system will begin in September.
The announcement was made via webcast on August 29 during an Early Adopter Workshop in Rosemont, Illinois.
During today’s training, Brainard urged U.S. financial institutions and software vendors to upgrade their systems prior to the debut of the new service.
Brainard said, “The transition to real-time payment infrastructure takes concentrated work, but it is unavoidable.” “Now is the moment for all major players to commit the required resources to rapid payments,”
Engagement is anticipated to rise as a result of initiatives such as a pilot program, the FedNow Explorer resource, the FedNow Community, and the FedNow Early Adopter Workshop.
FedNow, according to the Federal Reserve, is an immediate payment system that enables real-time transactions between American families, companies, and financial institutions.
Brainard said that the service is based on cloud technology, enabling the payment system to grow without losing reliability. This scalability applies to both the system’s throughput and geographic coverage, providing uninterrupted service even in distant areas.
FedNow is notable within the cryptocurrency sector since it has been promoted as an alternative to a digital currency issued by a central bank. Michelle Bowman, governor of the Federal Reserve, declared on August 17 that FedNow “addresses the concerns that some have expressed regarding the necessity for a CDBC.”
Meanwhile, Brainard has stated that creating a CBDC would need legislative approval and would require at least five years to plan and administer. As such, FedNow will very definitely be completed before any CBDC initiatives in the United States.
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