US Federal Reserve Launches Instant Payment Despite Concerns
By Stefan J. Bos, Chief International Correspondent Worthy News
WASHINGTON (Worthy News) – The U.S. central bank launched an “instant payment system” Thursday despite concerns that it will lead to more state control over personal finances.
The Federal Reserve said its “FedNow” service “is now live” and will eventually allow everyday Americans to send and receive funds in seconds, 24 hours a day, seven days a week.
“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,” the Fed added in a statement.
The FedNow service, planned since 2019, seeks to end the several-day lag it often takes for cash transfers to settle. It will bring the U.S. in line with countries such as the United Kingdom, India, Brazil, and the European Union, where similar services have existed for years.
But critics view FedNow as a state attempt to control people’s finances and a precursor for the U.S. Central Bank Digital Currency (CBDC) that the United States has been working on.
Among those expressing concern is Forbes magazine contributor Norbert Michel, vice president and director of the Cato Institute’s Center for Monetary and Financial Alternatives.
“If the tide continues to move in this direction, with central banks providing retail bank accounts to the general public and controlling every aspect of money, there will be little room left for a private banking industry,” Michel warned recently.
EVERYDAY PAYMENTS
However, Federal Reserve Chair Jerome H. Powell seemed to disagree, saying the FedNow service would “help make everyday payments over the coming years faster and more convenient.”
Over time as “more banks choose to use this new tool, the benefits to individuals and businesses” will include enabling a person to immediately receive a paycheck,” he said. Additionally, a company could “instantly access funds when an invoice is paid,” Powell added.
Yet the ability to fast access or move (digital) money through the Federal Reserve will enable the government to monitor Americans’ lifestyles more easily, critics say.
FedNow is launching with dozens of banks and service providers certified to use the service, including community banks and large lenders like JPMorgan Chase (JPM.N), Bank of New York Mellon (BK.N), and US Bancorp (USB.N).
The Fed plans to include more “banks and credit unions” this year.
It noted that by Thursday, 35 banks and credit unions were utilizing the service, as well as the Treasury Department’s Bureau of Fiscal Service.
“In addition, 16 service providers are ready to support payment processing for banks and credit unions,” the Fed added.
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