Wanting To Compete With Crypto, The Fed Launches Instant Fednow Payment Service

Federal Reserve launched the Fednow remittance service. (Photo; Doc. Cryptorank)

JAKARTA - On Thursday, July 20, the Federal Reserve announced the launch of their latest instant payment system, "Fednow Service," which has joined 35 banks and credit unions, US Treasury Department, and 16 service providers. Famous banks such as BNY Mellon, JPMorgan Chase, People's Bank, US Bank, and Wells Fargo Bank are several financial institutions participating in this initiative.

Fednow services aim to ensure non-stop payment processing 24 hours a day, 7 days a week, and 365 days a year, by offering security features to protect data payment integrity and security. However, it is important to note that Fednow is not a new currency form or a move to eliminate cash or other forms of payment.

Federal Reserve chairman Jerome Powell expressed his support for this innovation, "The Federal Reserve is building a Fednow Service to help make daily payments in the coming years more quickly and comfortably."

He emphasized the potential benefits of this service, "Over time and the more banks are using this new tool, the benefits for individuals and businesses will include receiving salaries instantly or getting direct access to funds when invoices are paid."

Fednow services serve as interbank payment systems and operate in line with other payment services from the Federal Reserve such as Fedwire and FedACH. Federal Reserve is committed to collaborating with more than 9,000 banks and credit unions across the country to ensure the wide availability of this service for their customers.

Although the Fednow Service has the support of many parties, there have been several views from the public regarding its relationship with the central bank digital currency (CBDC) and cryptocurrency. However, the Federal Reserve firmly states that Fednow Services are not related to CBDC and do not aim to replace cryptocurrencies.

Omid Malekan, an assistant professor at Columbia Business School, pointed out that Fednow Services do not eliminate the need for cryptocurrencies. He stated, "Debating that Fednow eliminates the need for crypto (or even stablecoins) is the same as arguing in 2005 that replacing VHS leased from Blockbuster with DVD will eliminate the need for streaming."

With the launch of the Fednow Service, the Federal Reserve demonstrates its commitment to continuing to innovate in strengthening the payment system in the United States. Despite the diverse views, this service is expected to provide benefits to the community and increase efficiency in the day-to-day payment process.