The United States Federal Reserve (Fed) will launch the FedNow service in July 2023, according to an announcement on March 15.
FedNow Launching In July
FedNow is a service that allows banks to transfer funds speedily across the broader financial system in the country. Described as a “modern” instant payment service, the platform was first announced in 2019, but the Fed plans to activate the service in the next few months.
From the first week of April, the Fed will begin certifying participating banks ahead of launch. Those willing to take part will have to complete a customer testing and certification program. The details of the program were derived from the FedNow pilot program. Information collected, the Fed says, will aid early adopting banks in preparing before they begin initiating live transactions.
Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive, wants financial institutions to gear up ahead of the launch. FedNow, he says, is open for all regulated banks in the country.
We couldn’t be more excited about the forthcoming FedNow launch, which will enable every participating financial institution, the smallest to the largest and from all corners of the country, to offer a modern instant payment solution. With the launch drawing near, we urge financial institutions and their industry partners to move full steam ahead with preparations to join the FedNow Service.
Tom Barkin, president of the Federal Reserve Bank of Richmond and FedNow Program executive sponsor, said the platform would be adaptive, resilient, and accessible.
A Blow To Ripple?
The announcement of FedNow is amid the proliferation of alternative, blockchain-based solutions, especially Ripple.
Ripple Inc., the blockchain company closely associated with XRP, a cryptocurrency native to the XRP Ledger, aims to offer cheap, instant cross-border payment solutions for banks.
At the core of their service, through the Liquidity Hub, Ripple allows banks, some of whom are part of the RippleNet, to use XRP and move funds.
By leveraging a cryptocurrency, Ripple enables partnering banks to move funds globally more efficiently. As they do so, transactions are settled instantaneously. Over the years, partners, leveraging the Liquidity Hub, have been able to utilize the platform for their varied needs.
However, as it appears, the Fed is now offering an alternative to banks in the United States to move funds across the financial system, using their solution.
Ripple has an ongoing case against the United States Securities and Exchange Commission (SEC) as the regulator claims that XRP, the token key in Ripple’s cross-border payment solution, is an unregistered security.
The SEC has also issued a Wells Notice to Paxos, the issuer of BUSD. In the letter, the regulator said the stablecoin is a security.
