Fed Launches New Instant Payment FedNow Service – Does This Undermine Crypto’s Use Case?
The US Federal Reserve announced on Thursday that its long-awaited FedNow Service has gone live.
According to a post on the Fed’s website, "banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year”.
As per the Fed’s announcement, the FedNow service kicks off with 35 users already.
These include what the Fed refers to as “early-adopting” banks and credit unions and the US Department of the Treasury's Bureau of the Fiscal Service.
16 further service providers are also ready to support payment processing for the service.
One of the key touted use cases of cryptocurrencies is that they offer a means of instant 24/7 payments between individuals.
Prior to the launch of the Fed’s FedNow service, transferring funds in the US had been cumbersome.
Many existing clearinghouse systems only offer same-day service, while cashing a cheque can face delays of days or even weeks.
But with the Fed having now rolled out a 24/7 instant payment service, some are worried that crypto’s use case might have now been weakened.
Of course, 24/7 instant payments are only part of crypto’s main touted use case.
Arguably the most important use case is crypto’s decentralization, or at least the decentralization of cryptocurrencies like Bitcoin, Litecoin and the Ethereum blockchain.
Decentralization means the system has no one single point of failure, and no one individual or entity can censor the network to their own benefit, or to the detriment of others they don’t like.
That remains in stark contrast to the centralized world of traditional finance, where bank accounts and transactions, including via the Fed’s new FedNow service, remain subject to arbitrary
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