A senior FTC official in the US cites Libra in support of FedNow Service. And he has argued for urgent action and the launch of its real-time payment system.
08 November 2019, AtoZMarkets – Rohit Chopra is a commissioner of the US Federal Trade Commission. He expressed support for the central bank’s proposal to launch a new round-the-clock real-time payment system. That is called FedNow Service.
FTC Libra FedNow Service
In his letter, Commissioner Chopra argued that the central bank must act quickly to prevent new threats to its supervision. Whether that is under the umbrella of a potential monopoly of private megabanks or a competitor of the private sector like Facebook. He wrote as the large private companies on Wall Street and Silicon Valley seek to take advantage of their market power by controlling critical infrastructure. It is more important than ever for the board to implement this proposal quickly.
The FedNow service has been in preparation since at least 2018. if not earlier, it has been introduced as a new 24/7/365 real-time payment and settlement service in a public announcement made by the Fed in August. The service will, it seems, be made available to businesses and the general public. And it aims to allow consumers to manage their funds more flexibly. Also, it will make urgent payments outside traditional banking hours.
Commissioner Chopra’s letter is symptomatic of federal officials’ concerns over the prospect of private-sector competition. Fed is in the control of payments through its oversight of the check clearing system, electronic transfers, and automatic clearing houses (ACH).
Suppress Innovation and Distort Incentives
He writes that while the monopoly of a private megabank on our electronic payments system could suppress innovation. And it may distort incentives in markets. He shares the concerns of Fed President Jerome Powell and Governor Lael Brainard as to the nature of the risks explicitly presented by Facebook.
The list of uncertainties raised by the Libra project will take time to unpack and process. But regardless of the final fate of Libra, the emergence of the proposal underlines the appetite for real-time payments and the urgency of the intervention of the Federal Reserve.
FedNow Will Not Go Live Until 2024
Rohit Chopra sees a demand for prompt payments, noting the pent-up frustration of high bank charges. And he found that other real-time technologies have spread rapidly. People do not know what FedNow looks like or how it would work. The project will not be commissioned until 2024.
However, there is no indication that FedNow will use the blockchain at any time. Two US lawmakers have written to the Fed asking what it thinks of this technology. Last month, French representatives Hill (R-Ark.) And Bill Foster (D-Ill.) asked the Fed several questions, noting that the global supremacy of the dollar could be threatened if other countries develop a widely adopted digital fiat currency first.
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