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Federal Reserve Launches FedNow

Federal Reserve Launches FedNow

The Federal Reserve has just made waves with the launch of its latest system for instant payments, the FedNow® Service. This new centralized service (a CBDC test run, in my opinion) by the infamous Federal Reserve allows banks and credit unions of all sizes to instantly transfer money for their customers, 24/7, 365 days a year. But… we know how the government tends to do things…

The FedNow Service claims that it revolutionizes everyday payments, providing benefits for individuals and businesses alike. While the article highlights the advantages of rapid access to funds, it fails to mention other potential features that could raise concerns within the cryptocurrency community.

Let’s explore the FedNow Service and CBDCs and its implications, particularly murmurs about features such as expiring money and transaction bans, along with privacy issues that could be reminiscent of an Orwellian nightmare.

The Federal Reserve’s new FedNow Service wants to offer a groundbreaking solution for instant payments (sort of like Bitcoin and cryptocurrency already did 10,000 times). They want to usher in a new era of efficiency and convenience in the financial sector with the ability to transfer funds “instantly.” This is versus them holding it and accumulating interest by holding your money for some period of time. They suggest people can now receive paychecks “immediately,” while businesses can access funds “instantly upon receiving payments.” Wasn’t this already the case, or were instant credit card transactions, automatic payroll deposits, and instant money transfers a facade of instantaneous?

Their goal is for an accelerated payment system that benefits consumers and small businesses, as it facilitates real-time cash flow management without the hassles of processing delays.

Despite the Federal Reserve’s article focusing on the advantages of instant payments, it neglects to mention some of the more controversial features that could be embedded in the FedNow Service. One such feature is the ability to code in “expiring money,” wherein funds automatically become inaccessible after a specified period. While proponents might argue that this encourages spending and boosts the economy, the implications for individual financial autonomy and privacy could be concerning. Users may question whether they want their money to be subject to external control, potentially leading to financial insecurity.

Another significant concern revolves around the possibility of the FedNow Service allowing transaction bans based on subjective criteria. If implemented, this feature could lead to the censorship of transactions that are considered “unwanted” by authorities, which could be influenced by the political climate or societal values. While the intention might be to curb illegal activities, this approach could raise fears about financial freedom and censorship resistance. Decentralized cryptocurrencies emphasize the importance of an open financial system, free from external control.

While it would seem an upgrade from traditional paper money, digital currencies like the FedNow Service could potentially track users’ transactions, giving authorities unprecedented access to their financial activities. This aspect raises concerns about user privacy and surveillance, with potential implications that could be likened to an Orwellian nightmare. Privacy is a core value for many citizens, and the idea of transactions being easily traceable could deter privacy-conscious individuals from embracing the FedNow Service.

In fact, the centralized nature stands in contrast to the principles upheld by decentralized cryptocurrencies. While it is operated by the Federal Reserve, a central authority, many cryptocurrency enthusiasts value disintermediation and decentralization. The introduction of a central bank digital currency (CBDC) like the FedNow coin could potentially signal a move toward a more centralized financial system, which might raise concerns within the cryptocurrency community about their financial autonomy and independence.