What is FedNow? And how close are we to having a CBDC digital dollar?

April 12, 2023

I’m sure you’ve been seeing all the videos about FedNow and hearing people say the government is going to use it to take over your money and force you into digital currency.

This video is going to explain to you what the facts are. Not just about fed now – but also about the possibility of the United States creating a central bank digital currency – or CBDC.

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This is a deep dive video so if you don’t have time to watch it now, favorite it and come back to it later.

Ok – let’s go.

I don’t want you to hear the facts from me about all this. Why would i do that when the house financial services committee both democrats and republicans already did the work for me. Just a few weeks ago they grilled the guy in charge of not only the fed-now program but also this potential united states CBDC.

So let’s start with FedNow. What exactly is it?

As you just heard – FedNow is system. It’s not a currency. It’s a way for banks who qualify to talk to each other and the Federal Reserve in real time – to facilitate three things — instant transaction settlements, 24-7-365 available transfers and instant payment confirmation for both the sender and the recipient. *you* can’t sign up for fed now. Your banking institution signs up for FedNow. This is something that’s been in the works for almost 10 years and the truth is – the government is behind the 8 ball. Tech-based private-sector companies like Venmo and CashApp have been using this kind of system for years. But fed now is such a big deal because it’s the first and only digital instant-payment system created and backed by the US government.

So what would the FedNow system do for you? I want you think about your own, every day banking experience. We all know, it can take days to transfer money or make payments from your bank account. That’s because the federal government has no digital payments system for the entire United States banking system to utilize in real time. But that’s where fed-now comes into play.

It’s an instant transaction system that is different from those traditional ACH payments we all see in our accounts. ACH payments are usually made in bulk and because they get processed only at certain times — that what leads to delays. Fed now payments are processed in real time, one-by-one and that dramatically increases the speed that money moves. And because those payments are being moved and settled between sender and recipient in real time – those payments cannot be made unless there are sufficient funds. This helps consumers and merchants better manage their own cash flow, and lowers payment risk.

Basically, if your bank uses fed now you would no longer have to wait a few business days or wait till a holiday or weekend is over to get your money. It’s there instantly. And if you’re trying to pay a bill – you can pay it immediately, as long as the money is in your account. That would mean no more waiting for the bank to clear your online transaction or your check and risk getting hit with a late fee.

Now – the reason why you’ve been hearing about fed now recently is because starting at the beginning of April, the doors opened to banks that wanted to get certified by the Federal Reserve to use FedNow.

But what will it cost? Well, because FedNow is government-operated, it’s mandated to break even and not turn a profit. In early 2022 The Fed released a pricing structure. Now this is absolutely subject to change, but initially the fed expects a $25-a-month service participation fee for each routing transit number that enrolls. A fee of $0.045 cents per transaction would to be paid by the sender. And those who request payments pay a $0.01 per transaction fee. I’m not sure if that’s what your bank will charge you, this is just what the Federal Reserve said the FedNow program would cost the bank back in 2022.

Bottom line – does the fed now program force you in to digital transactions? The answer – absolutely is no. But if you want your money faster, or want to pay your bills faster and your bank is one of the qualified institutions that uses FedNow, it may be something that you can look into. FedNow is expected to roll out nationwide – this July.

Now – let’s talk about central bank digital currency…CBDCs. Which by the way have absolutely *no* connection to the fed-now program.  

My followers who have been with me for a while will remind everyone who’s new – I’ve been talking about this – long before it was cool on the internet. I posted this video in January of 2022 when the Federal Reserve put out the initial report on the findings of their multi-year study into the potential of creating a digital dollar. Then I told you last September about President Biden’s executive order 14067 which told all federal agencies to start coming up with recommendations for how *if* CBDCs become a reality, they would be regulated, made accessible, and safe for Americans. Back then I told you a US CBDC was a long way away, so I’m sure you’re wondering, that was a year ago – are we any closer now?

I’ll let the guy in charge of it tell you.

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You just heard him – the guy in charge says a United States central bank digital currency cannot exist without a law from congress that says so. And so far, there is no movement on any such thing in congress. 11 countries have launched digital currencies, 18 are in the pilot phase like China and 32 – including the United States are in the development phase. And if you’re feeling skeptical or worried about a united states CBCD don’t worry the Fed Chair and Congress are too. Fed Chair Powell says all the time his priority is *not* for the United States to be first to offer CBDC or even at the top of the pack –instead — he’d like to see the US come up with the right approach. He has said *if* the Fed were to make its own digital currency, it would essentially be electronic cash backed by the Central Bank and would *not* replace other forms of money outright.  At this point – lawmakers are asking all the same questions you are. Would a CBDC allow the government to surveil your finances? Or control other aspects of your life?

It all boils down to these two things.  Can the United States actually create and regulate a digital currency, according to the Fed Chair—yeah we’re probably a few years away from that. But the bigger and more relevant question is — will congress *allow* a CBDC to be created. Right now it does not seem like lawmakers are jumping up and down to approve any such thing.

More from the Federal Reserve about the FedNow program here.

More from the Federal Reserve’s FedNow bank application here.

Watch the full hearing from the House Financial Service Committee here.

Learn more about the Federal Reserve’s FedNow cost here.

Learn more from The Fed about how the FedNow program works with your cash here.

Read the FAQ from The Fed on CBDCs here.

More from the Atlantic Council on digital currency progress across the globe here.

Lisa’s January 2022 story on the Federal Reserve’s original report on CBCD here.

Lisa’s September 2022 report on President Biden’s Executive Order 14067 here.