FedNow is HERE !

Well, you can now get your money faster than ever thanks to the approval of a program called FedNow. The Federal Reserve approved the nation's use of the system which can help Americans get their money instantly rather than waiting one to two business days for a transfer. The global economy is undergoing one of the most significant changes of the last 500 years and that change is called FedNow. This system promises significant things like instant payments, meaning your banks and some of your applications will allow you to send money instantly. You'll also be able to pay your bills without having to wait for weekends or holidays for them to be processed. In other words, this new banking system will allow you to make payments whenever and wherever you want, 24 hours a day, 365 days a year. This new FedNow system already has the support of 35 of the most powerful US banks such as JP Morgan and Wells Fargo. But the real question is whether this new system is good or bad. So, in this video, we will see what this new FedNow system is, its advantages and disadvantages and also debunk some myths about this new payment method. Something important about this new system is that you don't have to learn how to use it. It's not like a new app you have to download. You're already part of this new system if you have a bank account with one of these 35 financial institutions that are already part of FedNow. You won't even notice any changes. To explain this, we need to look back and understand that before real-time payment systems became a reality, when we sent money from one bank to another, banks only sent digital IOUs, which are promises of payment, not real money. However, a few years ago, the development of its first RTP protocol, a real-time payment system, began. Since then, the majority of the country's banks have been using this system and currently, Now, on July 20th, FedNow was launched, the new real-time payment system that the government has been developing. Interestingly, both RTP and FedNow do exactly the same thing. They both serve to send money in real-time without the need to verify those digital IOUs, and this is achieved at a cost of just a few cents per transaction. Now, to better understand why the government wants to implement this new system, we need to look at who owns them. RTP is owned by the clearinghouse, which is owned by 26 of the world's largest banks, while FedNow has a single owner, the Federal Reserve. So, the question is, if we already had a well-functioning real-time payment system, why do we need FedNow? Well, that's why many people are concerned, as they think that this way the government will have total control over our money. But the truth is, it's not like that. However, what is true is that with the implementation of this system, it becomes more feasible to create a CBDC, a Central Bank Digital Currency. To understand all of this, let's look at it this way. If the FedNow system represents the national mechanism for settling payments, then a CBDC is the global variant of that system designed to facilitate international transactions between banking entities. Another interesting fact is that in early March 2022, President Joe Biden issued an executive order to establish a framework for the implementation of a CBDC, bringing the United States closer to its own version of this digital currency, which will be used for international bank transfers worldwide. This project, known as Project Cedar, successfully completed an initial 12-week testing phase in 2022. Now, while there has been a lot of talk and speculation about the implementation of this new system, what many people don't know is the main reason why they're trying to create these systems. The problem with our current system is that when trying to send money internationally from one bank to another, it's very slow and costly, because every time we make an international bank transaction, it usually takes two days to settle, which involves counterparty and credit risks. This is because when an international payment is sent, it needs to go through one, two, or even three intermediary banks to verify the transaction as it goes through multiple currency conversions. This is not efficient, safe, or fast, not even for the banks. However, after testing in phase one of Project Cedar, they discovered they could reduce that two-day transaction to less than 10 seconds, and it would cost them only a few cents, making them much more efficient for the use of these CBDCs. Basically, these CBDCs are essentially distributed ledger technologies, like those of Bitcoin and cryptocurrencies like Ethereum and others. Right now, the project is in stage two of development, and multiple nations around the world are addressing this issue. The entire global financial system is competing to create its own digital currency. In fact, as we can see, 11 countries have already implemented their own digital currency, 32 countries are in the development process, and 46 are conducting research. The data shows that more nations are getting involved in this initiative every month. In total, 130 countries, representing 98% of the global GDP, are in some way related to the creation of a digital currency. The side effect of this new system is that it gives banks and the government various capabilities and, above all, control over our money, which has become a concern for people. Now that this system is being implemented, a digital currency will inevitably be created in the near future in the United States, and this has triggered deep fear among the population. In fact, nowadays, four out of five people distrust their government in the United States. This is because over time, citizens have realized that many of the decisions their governments make are only for the benefit of a few. This is why trust in governments has plummeted since 1964. Now, speaking more specifically about the powers the state would gain if this system and this digital currency become the sole form of commerce, the Federal Reserve would have absolute power to take our money away. In fact, what would you say if I told you this has already happened? In 1933, the authorities of that time attempted to confiscate all the gold that people had with the well-known Executive Order 6102, which specified that every American citizen should surrender all the gold they had or else they would be fined. Now, as bad as this might sound, the truth is that the current banking system can already do this. In cases of illegal activities, it's not uncommon for banks to freeze the accounts of the people involved, meaning they withhold their money and it's possible they might take it away. Now, the good side of this is that we still have different forms of payment today. We can pay with cash, cards, or even cryptocurrencies. But if in the future the government wants to eliminate these alternative forms of payment, that's something we should be concerned about, as that would indeed give the government absolute control over our money. Another negative point is that these digital currencies might have an expiration date. Digital currencies that already exist today, like the Chinese Yuan, have an expiration date. If you don't spend your money within a certain period, it will simply disappear. In the worst case scenario, they could even force you to spend your money. For example, in the future, if the government wants to stimulate the economy, they could compel citizens to spend more. Another negative point would be that the government would have the power to spy on everything we do, buy, or sell, similar to what technology companies already do. They track all our movements, preferences, and daily decisions to show us what the app thinks we want to see based on our habits. Now, on the other hand, there are also positive aspects to the implementation of this new system. A digital currency would allow the government to control inflation better and also help stimulate the market if needed. It would also greatly reduce the costs of the transactions we make. For example, when we make any type of transaction, there's always an intermediary like Visa or MasterCard that takes a small commission, which increases costs. With the implementation of a digital currency, intermediaries would be bypassed, making our transactions much more direct, cost-effective, and straightforward. It might even reach a point where you don't have to worry about your tax payments anymore, as the government would automatically deduct them before giving you your money. In summary, there are both positives and negatives to the implementation of this new system and a new digital currency. But this is something we won't be able to avoid, as sooner or later it will happen. The United States can't fall behind in this technological and financial competition that's happening worldwide. Fortunately, for now, the Federal Reserve isn't forcing other commercial banks to participate in the FedNow payment system. And this is reflected in the fact that both Citigroup and Bank of America have not yet registered, at least for now. It may still be many years before we have a real digital currency, but it's important to pay attention to what's happening. But what do you think? Do you think FedNow will be an advancement for society, or do you think it's a way for the government to control us? Let me know your opinion in the comments, and don't forget to give us a like and subscribe if you enjoy this type of content.