A newly-announced service from the Federal Reserve could invite a future U.S. Central Bank Digital Currency (CBDC) in the U.S. While pitched as a tool for financial efficiency, a CBDC poses a grave threat to financial privacy and invites further politicization of money. 

The U.S.’s central bank announced the launch of FedNow—which is billed as a nationwide instant payment network. First announced in 2019, a formal certification of the service begins in April and is expected to formally launch in July. 

An official press release describes FedNow Service as this: “Through financial institutions participating in the FedNow Service, businesses and individuals will be able to send and receive instant payments at any time of day, and recipients will have full access to funds immediately, giving them greater flexibility to manage their money and make time-sensitive payments.” 

Critics of the service, however, have said this will invite a CBDC in the future with the establishment of a Fedcoin A FedCoin, in essence, would nationalize the payments industry and stop competition from banks, credit card companies, and third-party payment apps like Venmo.

CBDCs should not be confused with cryptocurrency. The former is a digital version of existing fiat money tied to central banks, while the latter are digital assets unencumbered by the bureaucracies of central banking systems as they are comprised of a decentralized network.

The key distinguishing factor is who or what controls the currency’s value. The federal government, ultimately, would exert control here. One cryptocurrency advocate noted the suspicious timing of the service around the collapse of financial institutions like Silicon Valley Bank. 

Coindesk further explained, “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.” 

The timing comes a year after the White House issued a March 2022 Executive Order on Ensuring Responsible Development of Digital Assets—including a CBDC—and following the completion of the Federal Reserve of New York’s pilot program to explore the “interoperable network of central bank wholesale digital money.” 

As I’ve written here at IWF, CBDCs—or digital tokens—pose great problems to the banking system and are the preferred banking system of entities like the Chinese Communist Party: 

The Biden administration also expressed interest in creating a U.S. Central Bank Digital Currency (CBDC) ‘that is interoperable with CBDCs issued by other monetary authorities [and] could facilitate faster and lower-cost cross-border payments and potentially boost economic growth, support the continued centrality of the United States within the international financial system, and help to protect the unique role that the dollar plays in global finance.’

Per the Atlantic Council, 11 nations worldwide have already enabled CBDC programs. Dozens of countries are currently experimenting with them too. 

Congressional Republicans and financial entities have expressed doubt about a U.S. CBDC. 

Majority Whip Tom Emmer (R-MN) described centralized digital tokens as potentially dangerous surveillance tools.  

“We continue to strongly believe that the risks of a U.S. central bank digital currency outweigh any theoretical benefits,” American Banking Association President Rob Nichols said

To learn more about CBDCs, go HERE.