The U.S. Federal Reserve has officially launched its new instant payments service, FedNow, which makes the process of sending payments in the U.S. almost instant. While the Fed denies any ties to the digital asset space, experts say the new system could lay the groundwork for the infrastructure needed for a potential central bank digital currency (CBDC) in the U.S. This has led to a fresh airing of warnings about potential privacy and control risks around a digital dollar.
This is a payment system, not a digital token or a CBDC, but it is something that can be used to facilitate the creation of a CBDC, said Jim Bianco, president of Bianco Research. Dave Weisberger, CEO and co-founder of CoinRoutes, added that if FedNow does indeed become a programmable CBDC, then it could theoretically be used to block payments for items the government doesn’t favor or to cut out people from the financial system who are seen as threatening in some way to governing authorities, aka, political opponents. In that situation, things could get dystopian very quickly.
Jim Iuorio, managing director of TJM Institutional Services and a veteran futures and options trader, noted that cynics see the launch of FedNow to be a move toward an eventual central bank digital currency and a cashless society. They argue that the government having access to every transaction opens the door to authoritarianism and abuse.
Officials at the Fed have been studying the potential for a government-issued digital currency, and Fed chair Jerome Powell himself has repeatedly vouched for the exploration. Even banks themselves are skeptical about FedNow, criticizing the lack of leadership structure or a clear business plan, all while the system is financed through taxpayer money.
It may be a case of strange bedfellows – with banks and blockchain purists – incumbents and disruptors – united in their skepticism of FedNow.