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FedNow: The Trojan Horse of CBDCs

In the coming days, the Federal Reserve’s new fast payment system, FedNow, is set to go live. Despite its impending launch, many people lack a clear understanding of what FedNow is and how it works. This has led to misinformation and genuine concerns regarding its implications, especially given its similarities to Central Bank digital currencies (CBDCs). In this blog post, we will delve into the history and workings of FedNow, shedding light on the justified concerns surrounding its adoption.

FedNow History

The origins of FedNow date back to September 2013 when the Federal Reserve sought input from financial institutions on improving the payment system in the United States. This eventually led to the formation of the Faster Payments Task Force, which recommended the creation of a fast payment system similar to CBDCs. In August 2019, the Federal Reserve announced its plans to create FedNow, and the system’s features were unveiled in August 2020.

How Does FedNow Work?

FedNow can be thought of as a layer zero blockchain, offering basic functionality that is use case agnostic. Nodes on the FedNow network are U.S. banks with a master account at the Federal Reserve. Transactions involve moving funds between master accounts through messages. FedNow operates 24/7, ensuring instant settlement, and it aims to provide fast and efficient payment services.

Transaction Limits and Privacy Concerns

FedNow’s initial phase will have transaction limits for different node types, ranging from $100K to $2.5 million per transaction. However, there doesn’t seem to be a limit on the number of transactions a user can make per day. Privacy is a major concern, as FedNow users may have zero privacy due to transaction level reporting and fraud prevention measures.

FedNow Roadmap

Future phases of FedNow remain uncertain, but some potential features have been discussed. The Federal Reserve intends to evolve FedNow into a CBDC to compete with other countries’ digital currencies. Tokenization and cross-border payments are also among the future possibilities.

Building a Virtual Economy

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FedNow vs. Crypto

The impact of FedNow on cryptocurrencies depends on the type of crypto. Stablecoins, which are considered private money by regulators, may be affected more significantly. FedNow may eventually introduce its stablecoin, potentially giving the Federal Reserve control over the crypto market.


FedNow’s imminent launch raises genuine concerns about the future of financial privacy and individual freedoms. As the system rolls out and gains widespread adoption, it may become a trojan horse leading to the introduction of a CBDC system in the U.S. Cryptocurrencies, especially decentralized stablecoins, may become essential in preserving financial freedom and protecting against potential central bank control.

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