FedNow

Presidential hopefuls RFK Jr. and Ron DeSantis rail against FedNow

The two presidential hopefuls are of the opinion that FedNow is the first step in launching a CBDC that threatens privacy and autonomy.

Presidential hopefuls Robert F. Kennedy Jr. and Ron DeSantis are railing against the Federal Reserve’s FedNow payments system, claiming it would pave the way for a central bank digital currency.

In an April 11 Twitter thread, Democrat RFK Jr. — the nephew of former president John F. Kennedy Jr. — once again sounded the alarm bells over CBDCs, describing them as the “ultimate mechanisms for social surveillance and control” as he questioned the Fed’s claims that FedNow wouldn’t be used to facilitate a CBDC:

“The claim that FedNow is not the first step toward a CBDC would be more easily digestible were we not aware of the Biden administration’s steady barrage of hostile broadsides against cryptocurrencies.”

He added that cryptocurrencies like Bitcoin (BTC) “give the public an escape route from the splatter zone when this bubble invariably bursts” and claimed that Joe Biden’s administration was “colluding with the banksters to keep us all trapped in the bubble of profiteering and control.”

RFK Jr. filed his candidacy documents on April 5 and has been highly critical of CBCDs, stating last week that they “grease the slippery slope to financial slavery and political tyranny.”

FedNow is a 24/7 instant payments system that is slated to launch in July with the aim of speeding up transfers between financial institutions and businesses while also providing a government-backed alternative to similar networks provided by the private sector.

The Fed has played down talk of the system potentially being integrated with a CBDC. On April 8, it addressed a series of frequently asked questions by saying that “no decision” has been made to issue a CBDC and it “would not do so without clear support from Congress and the executive branch, ideally in the form of a specific authorizing law.”

In an April 11 tweet responding to the Fed’s statement, Florida’s Republican Governor DeSantis stated that it is “not merely ‘ideal’ that major changes in policy receive specific authorization from Congress; it is constitutionally required.”

“Unaccountable institutions cannot impose a CBDC on Americans,” DeSantis said. “They will tell us that [a] CBDC won’t be abused but we are wise enough to know better. This wolf comes as a wolf.”

DeSantis is reportedly eyeing a presidential run himself and has also been pushing back against CBDCs. On March 20, he called for a ban on CBDCs in Florida, citing concerns over their potential use for surveillance and control over citizens.

However, some remain unconvinced of these statements.

Related: CBDCs ‘threaten Americans’ core freedoms’ — Cato Institute

Speaking with NBC News on April 7, Aaron Klein, a former United States Treasury official and chief economist at the Senate Banking Committee, argued that the privacy-related concerns held by JFK Jr. and DeSantis are misplaced.

Klein noted that financial institutions are already required to report transaction data under current anti-money laundering and terrorism financing laws, and as such, a CBDC wouldn’t encroach on privacy any further.

“What [DeSantis] is getting wrong is this idea that there’s more reporting if there’s a central bank digital currency than if it’s a commercial bank digital currency,” he said.

Klein also spoke to AFP Fact Check on April 11 and emphasized that FedNow is purely focused on speeding up current Fed payment rails.

“There is no difference in privacy or surveillance whether you are using your Visa card or a CBDC,” Klein said, adding that FedNow and CBDCs have “nothing to do with the other.”

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Federal Reserve confirms July launch for FedNow instant payment service

The FedNow service aims to reduce the gap in payment time between United States financial institutions.

The United States Federal Reserve has confirmed a July launch date for its long-awaited instant payments system, seen by some as an alternative to central bank digital currencies and stablecoins.

The instant payment network will settle payments in seconds and can support transactions between consumers, merchants and banks. It does not rely on blockchain technology.

It’s a significant step for the government, as it is controlled by the Federal Reserve. Clearing House’s RTP network, which also offers real-time payments, is operated by a consortium of large banks. 

According to a March 15 announcement, the U.S. Fed said the debut of FedNow is set for July, with the U.S. Treasury and a “diverse mix of financial institutions of all sizes” ready to use the network from launch.

The Fed said it will “begin the formal certification of participants” during the first week of April in preparation for the launch.

“Early adopters will complete a customer testing and certification program, informed by feedback from the FedNow Pilot Program, to prepare for sending live transactions through the system,” the announcement reads.

FedNow was announced in 2019 and will provide round-the-clock, real-time gross settlement by funneling commercial bank money from a sender through a Fed credit account to its recipient. It also has built in features such as fraud risk management.

Following the official launch, the Federal Reserve outlined that it will push to onboard as many as financial institutions as possible in order to increase the availability of instant payments.

“The launch reflects an important milestone in the journey to help financial institutions serve customer needs for instant payments to better support nearly every aspect of our economy,” Tom Barkin, president of the Federal Reserve Bank of Richmond and FedNow Program executive sponsor, said in the announcement.

Some see the FedNow service as tackling a problem that both stablecoins and CBDCs also seek to solve.

The FedNow program, however, doesn’t use blockchain tech, while the Federal Reserve is known to have a cautious and skeptical view on stablecoins. 

Tweet from Meltem Demirors on FedNow. Source: Twitter

One of the major banking payment rails servicing U.S. crypto companies in the Silvergate Exchange Network (SEN) was shut down earlier this month following Silvergate’s collapse.

As it stands, SEN competitor SigNet from Signature Bank is still operational despite the bank’s forced closure on March 13. However, its fate is up in the air, while a number of companies have reportedly fled from the network following Signature’s troubles.

FedNow could also stand in place of a central-bank-issued digital currency.

Federal Reserve Vice Chair Lael Brainard emphasized during a House of Representatives Committee on Financial Services hearing in May that a CBDC would take far longer to get off the ground than FedNow due to regulatory hurdles.

“[If] Congress were to decide… to issue a central bank digital currency, it could take five years to put in place the requisite security features, the design features,” she said.

She added that FedNow will serve many of the same functions as a CBDC anyhow.

Related: Tassat blockchain to join FedNow service with B2B on-ramp as pilot prepares for launch

Fed chair Jerome Powell also spoke before the House Financial Services Committee on March 9 and suggested that a potential U.S. CBDC is still quite some time away.

“We’re not at the stage of making any real decisions,” he said, adding that “what we’re doing is experimenting in kind of early stage experimentation. How would this work? Does it work? What’s the best technology? What’s the most efficient?”

Commenting on FedNow, however, he stated that “we’ll have real-time payments in this country very, very soon.”