At a recent fintech event, the Federal Reserve’s vice chair for Supervision Michael Barr discussed how the Federal Reserve is taking proactive steps to work with the private sector to support innovation. The Federal Reserve has been working on modernizing its payment system for a few years now, and is in the final stages of creating the FedNow Service, a new platform for digital payments that will safely, efficiently, and instantaneously move money.
FedNow will improve safeguards on instant payments, making the financial system safer. And it will improve access to the financial system by reducing payment delays and the high costs associated with those delays. Banks and service providers will be able to build innovative financial products using FedNow’s real-time, low cost, safe payment rails, benefiting households and businesses. The Fed plans to launch FedNow between May and July next year.
“It will help to lower costs, extend access, and improve security for consumers and safety for the financial system,” Barr said.
ON the topic of central bank digital currencies (CBDC), Barr said the Federal Reserve has not made any decisions about whether to issue a CBDC, and if there is a belief that it makes sense to do so, there would need to be support of US Congress and Administration.
“In the meantime, we’re doing the work of understanding the technological requirements of such a system, deepening our understanding of potential policy tradeoffs, and taking a look at how other countries are thinking about and experimenting with CBDCs,” he added.