(Kitco News) - At a time when cryptocurrency payments are experiencing an uptick in adoption, as evidenced by Iran approving the use of cryptos to pay for imports, the U.S. Federal Reserve has announced that its FedNow instant settlement service will officially launch by July 2023.
The revelation from the central bank came during a speech by Vice Chair Lael Brainard on Monday in which the Fed representative indicated that “the technical testing phase of the FedNow service” will kick off in mid-September.
According to a press release from the Fed, over 120 organizations have already signed up to participate in the pilot program, with the most recent additions including “U.S. Bank, Exchange Bank, and several payment processors and solution providers, including Alacriti Payments LLC, ECS Fin Inc., Form3 and ModusBox, Inc.”
FedNow is designed to be an instant payment service that is available across the U.S. and accessible 24 hours a day, 365 days a year. The service will be accessible to financial institutions of any size, which will help to “broaden the reach of instant payments to communities nationwide.”
The government plans to roll out the service in phases, with the first phase focusing on clearing and settlement.
“The FedNow Service will transform the way everyday payments are made throughout the economy, bringing substantial gains to households and businesses through the ability to send instant payments at any time on any day, and the funds being immediately available to recipients to make other payments or manage cash flow efficiently,” Brainard said.
The Fed Vice Chair further stressed the importance of having funds be immediately available, noting that “the capacity to manage money in real time could help households avoid costly late payment fees or free up working capital for small businesses to finance growth.”
|
| Mt. Gox creditors refute rumors that the exchange will soon dump 137,000 BTC on the market |
In order to take part in the FedNow pilot program, participants will be required to complete a certification process to “ensure operational and messaging readiness and then move into production once the service is launched.”
Once the pilot program moves into the testing phase, the Federal Reserve will begin engaging with non-pilot financial institutions and service providers who want to be early adopters of the service.
According to Brainard, “after extensive industry engagement and planning, the Federal Reserve is on track to deliver the FedNow Service by May to July of 2023.”
Overall, the service is expected to benefit both consumers and businesses, according to Ken Montgomery, vice president of the Federal Reserve Bank of Bost and FedNow Service program executive.
“The benefits of instant payments are increasingly important to consumers and businesses, and the ability to provide this service will be critical for financial institutions to remain competitive,” Montgomery said. “Next year, financial institutions will be able to use the FedNow Service as a springboard to provide innovative solutions to their customers.”
