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US Federal Reserve Governor Pushes for FedNow Instead of US CBDC

UTC by Bhushan Akolkar · 2 min read
US Federal Reserve Governor Pushes for FedNow Instead of US CBDC
Photo: Wikimedia Commons

Fed governor said that the FedNow service will cater to the demand for instant payments while addressing a key value proposition of having a US CBDC.

On Wednesday, August 17, US Federal Reserve Governor Michelle Bowman spoke about the further work by the central bank in the current macro scenario. He also spoke about their engagement or crossovers with FinTech and crypto industry concerns. However, one of the key discussions was surrounding the US central bank’s digital currency aka Digital Dollar. As other top economic competitors like China have been gearing up the development of their CBDC, all eyes are currently on what the Fed is willing to do. But Fed governor Bowman said that their ongoing work on FedNow will help to address things that a US CBDC would do.

In his speech on Wednesday, Bowman added:

“The FedNow Service will enable financial institutions of every size, and in every community across America, to provide safe and efficient instant payment services. It is intended to be a flexible, neutral platform that will support a broad variety of instant payments. My expectation is that FedNow addresses the issues that some have raised about the need for a CBDC.”

Banks and Cryptocurrencies

Several traditional banking institutions have recently shown their affinity for crypto. Looking at the strong institutional demand, banks are willing to offer crypto-related services to clients. Touching down on that matter, Bowman said:

“I am hearing more discussions involving banks’ interest in offering services involving crypto-assets. The chatter seems to originate more from those outside the banking industry, but I’ll put that aside for now”.

Earlier on Tuesday, the Federal Reserve issued a warning to banks over their participation in crypto. The US central bank issued an advisory letter outlining the steps for Board-supervised banks for engaging in crypto-related activities. This includes ensuring all legal and regulatory conditions are met before offering crypto services. Besides, they should also inform the Fed about their actions.

During her recent speech, Bowman also commented on Fed’s request for master accounts. Commenting on the matter, she said that “publishing the guidelines is an important step to providing transparency and consistency across the Federal Reserve System. However, more work remains to be completed before a process is established to fully implement the guidelines. In the meantime, there is a risk that the guidelines could establish false expectations regarding the timeline for evaluating and acting on these requests.”

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