FedNow 2023 launch doesn’t create U.S. digital currency

The Federal Reserve announced on March 15 {that a} fee carrier referred to as FedNow will launch in July 2023. 

That’s ended in on-line claims, including this one from Robert F. Kennedy, Jr., equating FedNow to a central bank digital currency (CBDC). 

VERIFY reader Wanda additionally requested if claims that FedNow creates a CBDC are true. 

Does FedNow create a central financial institution digital currency?

No, FedNow does now not create a central financial institution digital currency.

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FedNow isn’t the similar factor as a central financial institution digital currency (CBDC), nor does it create one, the Federal Reserve and a number of other professionals advised VERIFY. 

The Atlantic Council, a nonpartisan U.S. assume tank, defines a CBDC as digital cash “backed and issued by a central bank.” In the United States, that central financial institution will be the Federal Reserve. 

Existing digital cash is sponsored and issued through business banks – now not the Fed. 

The U.S. does now not these days have a CBDC and the Fed has now not made any selections on issuing a digital buck.

Both the Federal Reserve and Steven Schwarcz, a professor of regulation and trade at Duke University School of Law, say FedNow isn’t a type of currency. It doesn’t create a CBDC, both, as some other folks on-line have claimed. 

“Rather, it’s merely an electronic system, run by the Federal Reserve, by which money can be transferred between banks more quickly than under prior systems,” Schwarcz mentioned. 

If your monetary establishment participates in FedNow, you’ll be capable of “send and receive instant payments in real time, around the clock, every day of the year,” the Fed says.

Former Federal Reserve Chair Lael Brainard said in August 2022 that the carrier might be “especially important” for families dwelling paycheck to paycheck or “small businesses with cash flow constraints.”

FedNow, because it’s these days envisioned, would permit banks to select whether or not they give you the carrier to their shoppers – and the implementations would glance other around the board, Darrell Duffie, Ph.D., a professor of control and finance at Stanford Graduate School of Business, defined. 

An executive order signed through President Joe Biden in March 2022 duties the Federal Reserve with taking a look into how a CBDC could be created, and comparing vital steps and necessities for enforcing one. 

But the Fed has now not decided on issuing a CBDC, and the country’s central financial institution says it might now not achieve this with out “clear support from Congress and the executive branch, ideally in the form of a specific authorizing law.”

Congress has not passed a law authorizing the Federal Reserve to factor a CBDC. 

Some other folks on social media have additionally claimed {that a} CBDC would substitute money and make paper cash “worthless.” But that’s now not true, both.