U.S. Federal Reserve’s Real-Time Payments System Coming in July

The new government-operated payments system – often used as an argument against the need for crypto’s payments innovations – will have its first participants certified within weeks.

AccessTimeIconMar 15, 2023 at 10:54 p.m. UTC
Updated Mar 27, 2023 at 4:26 p.m. UTC

The U.S. Federal Reserve is activating its long-awaited real-time payments system in July, the central bank said in a Wednesday statement, marking a transition that some have seen as a government challenge of the crypto sector’s instant-transaction advantages.

The FedNow Service, meant to solve the existing delays for clearing financial transactions between institutions, will begin certifying its first participants at the beginning of next month. The system will operate around the clock and provide immediate, full access to funds.

“We urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service,” said Ken Montgomery, the chief operating officer at the Federal Reserve Bank of Boston, who has been working on the new system he said will offer a “modern instant payment solution.”

FedNow has also been seen as a potential precursor to a central bank digital currency (CBDC), though the service could also undermine one of the key strengths of a digital dollar – the ability to transfer instantly. Fed officials have said the agency hasn’t made any decisions about a future U.S. CBDC, which they say would need the support of Congress, the Biden administration and the public.

Federal officials – including Fed Chair Jerome Powell, then-Fed Governor Lael Brainard and then-Federal Trade Commission Commissioner (now Consumer Financial Protection Bureau Director) Rohit Chopra – have also cited concerns about the proliferation of certain private stablecoins, like the now-shuttered Diem (formerly Libra) project, as a sign that a real-time payment network is needed.

Jaret Seiberg, an analyst at TD Cowen, suggested the system might actually be of use to crypto investors as a way for them "to fund and cash out of trades without having to leave cash or digital dollars on a trading platform," he wrote in a client note on Wednesday.

The Fed’s new system for transactions won’t be the first, though, because the banking industry already launched its own RTP network. That similar, private-sector competitor has been operating since 2017.

UPDATE (March 15, 2023, 23:02 UTC): Adds comment from TD Cowen.


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Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.