The Fed Plans on Using blockchain but is Ashamed to Admit it
In August, the Federal Reserve announced a plan to develop home-brewed ’round-the-clock-real-time payment and settlement service’ in order to support and offer instantly faster payments.
Although we all know what is the only way such a financial state could be achieved, the Fed categorematically denies using the terms decentralized, distributed ledger, blockchain, or cryptocurrency.
According to the announcement, the new system, which is dubbed as “FedNow” will enable real-time bank-to-bank payments, all day every day, and support cross-banking, opposing to the system the central bank utilizes at the moment, which seizes operations on the weekends and can take several days to settle payments.
Lael Brainard, Fed’s governor said that commercial banks have already spent more than $1b USD to come up with analogous solutions such as “Clearing House” but failed, as the system would benefit large banks to an extent, while the immediacy was absent from smaller banking institutions.
He added that “FedNow” will be accessible to all banks, no matter the size, and pointed out that Fed’s well-established connections with more than 10,000 banks across the US make Fed the perfect candidate to deliver this outcome.
To be honest, to me this sounds like a pitch coming from someone who’s pitching to himself, as Fed practically can do whatever it wants with the Dollar. I mean, they don’t have to convince people they’ll do it, they just have to actually do it, which comes to my second thought:
Better late than never
Being pragmatic, I know that US banks are already using blockchain-powered solutions for real-time payments and settlements. Some popular providers of such services include IBM, R3, Ripple Labs, and Ethereum, who are already working behind the Bank of America, JP Morgans, and Goldman Sachs to mention a few.
Even prior to the introduction of blockchain-powered monetary systems, PayPal could solve this problem a long time ago, considering it has an even better network, consisting not just by US banks, but with tens of thousands of international banks as well.
So, why’s the Fed suddenly trying to dress-up as savior-hero who wants to help people living a bill-to-bill life get access to their own money faster?
Based on Brainard’s statements, which condemn Facebook’s Libra, as well as Chinese payment giants such as Alipay and WeChat, I can only assume that this is a race between the US and China, better described by Putin, who says that the Huawei incident regarding 5G networks sparked the first ‘technological war’ of our times.
We refer to this as part of what is known and promoted as the US-China trade war, but if you think about what these countries actually trading, a tech war is indeed a better label.
The biggest irony though would not be the fact that the Federal Reserve wants to use blockchain technology but call it “FedNow”.
Brainard said that “Facebook’s Libra project raises numerous concerns that will take time to assess and address”, yet he was confident to add that the Fed aims to launch the NEW system by 2024.
I’ll just leave it here, and we can all laugh behind our screens.