FedNow is an ambitious project undertaken by the Federal Reserve, aimed at creating a nationwide, instant payment network that operates 24/7, 365 days a year. The initiative’s primary goal is to enable real-time, low-cost, and safe fund transfers for individuals and businesses, positioning the United States at the forefront of global payment systems. In other words, no more long waiting periods for a check to clear. Traditional payment methods, such as Automated Clearing House (ACH) transfers and wire transfers take days to settle. With FedNow, the goal is to complete payments in real-time, ensuring immediate access to funds and improved cash flow. Rachael Witkowski, writing for Forbes, suggests, “Think of it as a platform that will transfer your dollar online, the same way popular money apps like Paypal, Venmo and Zelle transfer funds. FedNow allows financial institutions to make those transfers happen directly between bank accounts in the blink of an eye.� FedNow is owned and operated by the Federal Reserve, which means the government gets unprecedented access to all your financial transactions. CBDC…. Central Bank Digital Currency A digital dollar would have the same status as physical cash, and its acceptance for payments and settlements would mandatory. At present, our government’s stated goal is to augment current payment options, but not to completely replace our currency. CBDCs reduce the risks associated with using cryptocurrencies like Bitcoin. Cryptocurrencies, like Bitcoin, are highly volatile, with their value constantly fluctuating. CBDCs, backed by a government and controlled by a central bank, would give households, consumers, and businesses a secure, consistent means of exchanging digital currency. You run CBDC assets off a computer or your phone. Users create a digital wallet and operate out of that, making or accepting payments online. (So far, no digital currency has been completely safe from cyber theft, but then, neither has any bank. CBDCs, like all digital assets, are subject to cyberattacks and other technological disruptions such as a server going down). Differences Between the CBDC and Cryptocurrency It is easy to confuse a CBDC and cryptocurrency, but they aren’t the same. A U.S. CBDC will be centralized and under the purview of the Federal Reserve, the U.S. central bank. It is a stable currency, backed by the Fed, meaning its value is regulated. On the other hand, cryptocurrency is decentralized, without any governing body, giving users more control, but also more risk. Cryptocurrency is not backed by a central bank, so it is a volatile currency, its value fluctuates. Cryptocurrencies run on distributed ledger technology (blockchain), meaning that multiple devices all over the world, not one central hub, are constantly verifying the accuracy of the transaction. Power is distributed rather than centralized as it would be in a national digital currency. Things to Think Hard About CBDCs allow governments to track ALL your financial transactions. Nothing on which you spend money, make money or receive money from is private. Furthermore, your account is vulnerable to be frozen, transfers halted and your private information deregulated. Every single financial transaction you make will be trackable. Countries already fully embracing CBDCs include China’s digital yuan (the e-cny). In countries like China with a social credit system in place, an individual’s money is always at risk. Not only does the government have purview over one’s spending, the government can prevent one from purchasing altogether. In China, you can’t buy a train or plane ticket or eat at certain places if your social credit score is not acceptable. In other words, a government can turn off your money. It can tell you what products you can or cannot buy. Imagine now how frustrating it is when insurance companies tell you what doctor you must see or what medicine or medical procedure you are allowed to have. Multiply that by everything. What’s Coming? If another country’s currency goes digital in a way that leaves the dollar in the dust, Americans will lose that financial advantage that allows us to influence foreign governments, such as through recent sanctions on the Russian government and oligarchs. However, the development of a USA digital currency could present the most dramatic expansion of federal power in history with a potential for deep losses of freedom. Also, without moving cautiously, commercial banks would be destroyed. Then, who would give loans? And, if everyone gets nervous and starts pulling their money out of commercial banks, there could be bank runs creating a real existential threat to our economic survival. Countries representing 95% of the global gross domestic product (GDP) are currently exploring or developing CBDCs, according to a study from the American think tank Atlantic Council. There is no doubt that digital currencies will continue to disrupt present economic paradigms. We see the current worries about the disruptions caused by AI (artificial intelligence) and the calls to slow things down. This is the future of money as well. We are going to need an educated, thoughtful and vigilant public. Vamos a ver! P.S. Let’s get financial education in our schools, so our kids have the knowledge they need for their financial futures. Many thanks to young Topangan Rama Kingston for suggesting and helping with this article.