- Governor Michelle Bowman said today that the Federal Reserve’s FedNow service could be ready by mid-2023.
- She suggested that payment services address the need for a central bank digital currency (CDBC).
- She also said that the Fed is creating expectations for banks that want to offer crypto services.
The Federal Reserve is considering a way to reduce A payment system for the needs of Central Bank Digital Currency (CDBC). Fed touts benefits of FedNow
A service called FedNow could fulfill the role envisioned for a CBDC.
Federal Reserve Governor Michelle W. Bowman speaks today at the Vincent Fintech Conference in Little Rock, Arkansas Various comments were made on the matter. In her speech, she said the Fed is developing a service called FedNow, a payment service for depository institutions.
FedNow “addresses the concerns raised by some about the need for a CBDC,” Bowman said. FedNow does not rely on government-issued stablecoins or CBDC. However, it plays a similar role and will allow financial institutions and customers to use services that compete with other payment providers.
Bowman said completing FedNow is a “high priority” and said the service should be ready by mid-2023. Development of the program began in 2019, and recent reports suggest the Fed has found participants and launched a pilot program.
While Bowman’s initial comments suggested FedNow is reducing demand for CBDC, the two efforts may be complementary. Bowman added that the Fed is considering whether a CBDC “may fit into the future U.S. currency and payments landscape,” even as it assesses the benefits of FedNow.
Bowman also commented on crypto-assets in general, noting that the Fed is witnessing “huge consumer demand” for banks to offer crypto services . These trends could lead banks to want to better understand these services and facilitate their customers, she said.
She added that banks have seen some customer deposits go to crypto companies, noting that banks “want to connect with the crypto industry by offering competing services to stop this outflow.”
Bowman warned that banks must consider the risks of offering crypto services. She said the Fed is creating regulatory expectations for banks on issues such as custody, buying and selling, lending and stablecoin issuance.
Yesterday, the Federal Reserve released information on these matters in a separate supervisory letter.
The Federal Reserve has long been at the center of CBDC development and other crypto regulations. Earlier this year, the government agency released a report on CBDCs that weighed the costs and benefits of such assets.
is also responsible for several rate hikes this year, most recently in late July, which appears to have boosted cryptocurrency prices.
Disclosure: At the time of writing, the author of this article owns BTC, ETH and other cryptocurrencies.
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