Federal Reserve’s Faster Payments Task Force Releases Final Report.
Report envisions new highly centralized and regulated (but faster) payment system.
Report also considers “FedCoin”, a digital currency that would be issued by the Federal Reserve.
Ripple also lobs in a proposal.
Is the Fed Leading the Battle Against Cryptocurrencies via its Faster Payments Innovation?
Last month we noted Dr Jens Weidmann, President of the Deutsche Bundesbank and Chairman of the Board of Directors of the Bank for International Settlements speech at the Bundesbank Policy Symposium in which he remarked “My personal take on this is that central banks should strive to make existing payment systems more efficient and still faster than they already are – instant payment is the buzzword here. I am pretty confident that this will reduce most citizens’ interest in digital currencies.”
Thus, it appeared that Dr. Weidman laid down the gauntlet – Cryptocurrencies, like Bitcoin and Litecoin, would soon meet their match as central banks would strive to innovate and create faster fiat currency based payment systems. This bold initiative would create lightening fast fiat payment systems and awe the public to the point they would lose interest in cryptocurrencies.
While it might appear that Dr. Weidman’s personal musings about creating faster fiat currency payment systems were of a visionary nature, the Federal Reserve has long envisioned a faster payment system- as far back as 2013. Indeed, the Federal Reserve has been contemplating strategies for improving the U.S. Payment System, that include a task force specifically in charge of creating faster payments.
While the central banks of Russia and China have hinted that they are considering national cryptocurrencies, the Federal Reserve has outlined no such plans for the dollar and has instead chosen to focus on potential upgrades to its payment system in terms of speed and security.
The Federal Reserve’s Faster Payments Task Force (FPTF) vision statement reads
“The Faster Payments Task Force envisions a system where, [by 2020], solutions both compete and interoperate to provide payment services that are faster, ubiquitous, broadly inclusive, safe highly secure and efficient.”
The FPTF Mission and Objectives document does not mention that the goal behind the quest for faster payments is to vanquish crypto currencies. Dr. Weidman’s strategic call to action, may however, give the Fed’s faster payments initiative new relevance.
The Faster Payments Task Force released part one of its final report in January 2017. Earlier this month, it released part two of its final report.
Part 2 of the Faster Payments Task Force report reveals, that unlike private cryptocurrency payment systems like Bitcoin and Litecoin, the FPTF envisions a highly centralized and very regulated payment system that will require “a formal governance framework that establishes rules, standards, and a baseline set of requirements for the faster payments. The task force also noted that laws and regulations affecting payments and payment service providers will also need to be evaluated to “ensure that they are suited to the unique characteristics of real-time payments.”
Fed Makes it Go Faster
The FPTF also believes that Federal Reserve involvement in administering the payment system would help make it faster. Part two of the FPTF final report requests that “the Federal Reserve develop a 24x7x365 settlement service and requests that the Federal Reserve explore and assess other operational role(s) the Federal Reserve might need to play to support ubiquity, competition, and equitable access to faster payments.”
Part two of the FPTK report gives an indirect nod to the innovations taking place in the private cryptocurrency space and advocates: “Continuing research on emerging technologies to deepen understanding of the risks they may pose [emphasis added] as well as the benefits they may offer,including the potential for serving underserved end users and use cases [emphasis added].
Requests for Proposals Yields BlockChain Solutions
The FPTF final report notes that they asked for proposals for end to end faster payment solutions. The FPTF received and reviewed 22 proposals from 19 different entities. Some of the proposals included the use of Distributed Ledger/BlockChain/Digital Currency technologies including proposals from HUB CULTURE,ECCHO, XALGORITHMS, KALYPTON GROUP LIMITED, NANOPAY CORPORATION, RIPPLE, THOUGHT MATRIX CONSULTING, LLC and TOKEN, INC.
The WINGCASH proposal envisions a faster payment system using a Federal Reserve-issued digital currency. This system would be “owned and operated by the Federal Reserve and the Governing Organization [whereby] the Federal Reserve that would issue digital currency (digital Fed notes) [that would be] tied to the Internet domain (Fednotes.com).”
A proposal by Wingcash would see the Federal Reserve issue a digital currency tied to the Internet domain fednotes.com
Image: © Can Stock Photo / Eraxion
MOBILE MONEY CORP presented a ‘cash-based, closed-loop solution using MoMo accounts to process banking transactions including faster payments that would serve the unbanked, underbanked and some banked.”
While it is laudable that the Federal Reserve is serious about speeding up and securing payments in the United States, irrespective of their motives, many might be more interested in seeing the Federal Reserve focused limiting its currency issuances, outlawing negative interest rates, off balance sheet transactions and the monetization of debt.
Further reading: UK faster payments initiative.
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