The US Federal Reserve’s Vice Chair for Supervision, Michael S. Barr, recently spoke at the Annual Fintech Conference in Philadelphia about the central bank’s role in supporting innovation. He highlighted the Fed’s new FedNow service, which offers instant transfers, as a significant advancement in the payments infrastructure.
Barr emphasized that FedNow allows instant payments to be processed throughout the year for various transactions. The service is available to all depository institutions, including large banks, regional banks, community banks, and credit unions. However, Barr acknowledged that it is up to these institutions to decide whether real-time payments are accessible to everyone. He expressed confidence that participation in FedNow would grow over time and make a substantial contribution to the existing payments infrastructure.
Despite Barr’s claim that FedNow is available to all depository institutions, Caitlin Long, a well-known advocate for cryptocurrencies and former investment banker, disputed the statement. In a tweet, Long accused the Federal Reserve of blocking access to certain depository firms, specifically mentioning her firm, Custodia Bank.
Long’s tweet gained attention, with one responder dubbing FedNow as “FedNo.” She also commented on Barr’s remarks about stablecoins, indicating that the Fed had missed an opportunity to gain regulatory authority over state-chartered stablecoin issuers like her firm.
Barr also discussed central bank digital currencies (CBDCs) and the importance of understanding the new technology and the tradeoffs it brings. He highlighted the need for engagement with innovation to ensure the continued support of a safe and efficient payments system in the future. However, Barr clarified that no decision had been made regarding the Fed issuing a digital dollar.
Overall, Barr’s speech at the Fintech Conference shed light on the Fed’s commitment to supporting innovation in the financial sector through services like FedNow, while also addressing the challenges and opportunities posed by digital assets and CBDCs.
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