New speculations are brewing as the US Federal Reserve introduces the FedNow Instant Payments service -TGN

The US Federal Reserve recently released the FedNow service system to enable instant payments; however, experts warn that the system could become a precursor to the infrastructure for a central bank digital currency (CBDC).

Launched on Thursday, July 20, the FedNow service aims to improve the flow of money in the U.S. economy by providing a variety of benefits to consumers and businesses. It will enable instant access to paychecks, facilitate last-minute bill payments and accelerate government payments to individuals.

“The Federal Reserve built the FedNow service to make everyday payments faster and easier for years to come,” said Federal Reserve Chairman Jerome H. Powell.

“Over time, as more banks choose to adopt this new tool, the benefits for individuals and businesses will include an individual receiving a paycheck immediately or a business having instant access to funds when a bill is paid.”

While this may seem like a positive move, as it aligns with a critical goal of the digital asset industry: to enable fast and accessible money transfers at any time.

Crypto enthusiasts believe this is another way for the government to lay the structure for government-issued CBDCs.

“This is a payment system, not a digital token or a CBDC, but it is something that can be used to facilitate the creation of a CBDC,” said Jim Bianco, president of Bianco Research.

However, the Fed refused the idea that FedNow is tied to an underlying intent in the July 10 FAQ.

Research on CBDC and FedNow concerns in the United States

While the United States has yet to adopt central bank digital currencies (CBDCs), several initiatives have been explored, including the New York Federal Reserve’s 12-week program to pilot a simulated digital dollar, in the government’s interest in digital currencies.

While Federal Reserve officials such as Fed Chair Jerome Powell and Fed Governor Michelle Bowman have been cautious about a digital dollar or CBDC, it is worth noting that Fed officials have been actively studying the potential for a government-issued digital currency.

Fed Chairman Jerome Powell himself has repeatedly expressed his support for exploring the idea.

With many cryptocurrency experts speculating that creating a CBDC could be the underlying intent behind FedNow, concerns have been raised about government control over a digital token leading to censorship and permissions from specific transactions or individuals.

“If FedNow does indeed become a programmable CBDC, then in theory it could be used to block payments for items not favored by the government or to keep people out of the financial system who are perceived in some way as a threat to government authorities, aka political opponents,” said Dave Weisberger, CEO and co-founder of CoinRoutes.

Some banks have also expressed skepticism about the FedNow system and criticized the lack of leadership structure and a clear business plan as it is funded by taxpayer money.

In addition, an unlikely alliance has emerged between traditional banks and blockchain enthusiasts, with both skeptical of FedNow.

“The problem, of course, is that the government is going to have to break the digital token, and they’re going to be able to allow and censor them for certain types of people in certain types of ways or certain types of transactions,” Bianco said.

The launch of FedNow has sparked debate, with some viewing it as a possible step toward an eventual central bank digital currency and a cashless society, raising concerns about government access to every transaction and the potential for authoritarianism and abuse.