Federal Reserve Clarifies: FedNow Service has no Relation to CBDCs

Instant Payments and CBDCs

The United States Federal Reserve recently clarified that its new service for instant payments between organizations — the FedNow Service — has no relation with central bank digital currencies (CBDCs).

The Fed certified the FedNow Service as “ready” after it onboarded 41 financial institutions, 15 service providers, and the U.S. Department of the Treasury to test the system before its launch by the end of July 2023. However, the central bank had to confirm that the promise of instant fiat payments and real-time gross settlement (RTGS) is not powered by a CBDC.

In a tweet, the Fed stated that the FedNow Service is similar to other payment services, such as Fedwire and FedACH, which work within the boundaries of the crypto.com arena and web 3.0 example. It said:

The Federal Reserve further confirmed that it has not yet decided on issuing the highly anticipated CBDC and “would only proceed with the issuance of a CBDC with an authorizing law.”

Metal Blockchain Joins FedNow Service

The Federal Reserve’s list of participants for its FedNow Service was recently highlighted. However, the Fed is planning to onboard all 10,000 U.S. financial institutions in the near future.

On May 11, the Fed revealed its integration of Metal Blockchain into the FedNow Service. Metal Blockchain is a crypto network developed by Metallicus, and is a fork of Avalanche’s code. Its documents reveal a subnet called X-Chain, which allows developers to set rules for transferring assets. For instance, a token may be issued with the rule that it “can only be sent to US citizens” or “can’t be traded until tomorrow.”

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