The Federal Reserve recently launched FedNow, an instant payment service that some experts are concerned will pave the way for a central bank digital currency (CBDC). U.S. Rep. Warren Davidson (R-Ohio) stated that he believes lawmakers need to prohibit the development of a CBDC, because it allows money to be used as a means of control.
"The Federal Reserve is building the financial equivalent of the Death Star," Davidson tweeted this week. "Central Bank Digital Currency (CBDC) corrupts money into a tool for coercion & control. Congress must swiftly ban then criminalize any effort to design, build, develop, test or establish a CBDC."
The Federal Reserve launched FedNow on July 20 and said the service will help banks and credit unions facilitate faster transactions, according to an official press release.
"The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient," said Federal Reserve Chair Jerome Powell said in the release. "Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid."
Although the Fed has stated that FedNow is not related to digital currencies, some experts are concerned that the service could be paving the way for the development of a CBDC, a recent CoinDesk report said.
"If FedNow does indeed become a programmable CBDC, then it could theoretically be used to block payments for items the government doesn’t favor or to cut out people from the financial system who are seen as threatening in some way to governing authorities, aka, political opponents,” Dave Weisberger, CEO and co-founder of CoinRoutes, said in the report. "In that situation, things could get dystopian very quickly.”
Others are more optimistic about the new service, including Rob Nichols, president and CEO of the American Bankers Association (ABA).
"We welcome the Federal Reserve's launch of FedNow and its official entry into the world of real-time payments," Nichols said in a June 20 ABA press release. "Fully realizing the benefit of these new rails will require the Fed to work hard to encourage interoperability between the systems, urge banks’ core providers to quickly allow banks to offer these real-time options in a timely and cost-effective way, and ensure that America’s consumers and businesses have a strong understanding of the value and considerations for real-time payments use.”
Eleven countries have launched a CBDC, while 21 additional countries are in the pilot phase and another 32 countries are in the development stage, according to the Atlantic Council digital currency tracker.
