The FedNow digital USD is coming

America has been planning the implementation of a digital currency since 2019, but when the 2024 soft release was moved up to a premature July 2023 (full release), the U.S. media didn’t mention this huge economic evolution. No updates, no long discussions or brief debates… a total media blackout.

And now, with the debt ceiling being tested and the U.S. economy on shaky ground, some are suspecting another reason for the rushed release of FedNow.

What is FedNow?

FedNow is a real-time payment system that will provide an alternative to the traditional payment methods that are currently used in the United States, AKA a Central Bank Digital Currency (CBDC). It is basically a centralized cryptocurrency backed by an institution.

The official goal of FedNow is to make the payment system more efficient and secure, and to improve access to financial services for people who are unbanked or underbanked. The system will be available 24/7 and will process digital dollar transactions in real-time, making funds available almost instantly.

That’s the official version — ease of transactions. We’ve seen instant transactions from plenty of banks all over Europe, without the need for a centralized blockchain system. Revolut has been doing it successfully for years, so why the hurried implementation to release the digital dollar one year earlier than scheduled?

Why implement a centralized digital dollar?

By providing a more modern and efficient way of transferring funds, FedNow could potentially make the U.S. economy more productive and competitive. This could lead to increased investment and economic growth. Something the U.S. is greatly in need of right now.

In addition, the implementation of FedNow could reduce the reliance on other payment systems, which are subject to higher fees or longer processing times. This could lead to a reduction in transaction costs and an overall increase in economic activity.

Releasing a crypto-dollar might also attract institutional investors from overseas who could see the benefit of holding an agile digital asset. International interest could help the U.S. distribute the next wave of U.S. debt that will follow the raising of the debt ceiling.

It all sounds like next-gen financial innovation, so why aren’t American financial media giants talking about it? Only independent analysts and economists have something to say, and it’s far from positive.

Conspiracies circulating about FedNow

A digital currency could provide a way for countries to bypass traditional payment systems and engage in direct trade with the U.S. This could potentially reduce the role of intermediaries, such as banks, and make international trade more efficient and cost-effective.

Suggestions have been made by many that a digital currency could be a way for the U.S. to default on its debt without actually defaulting. This is because a digital currency could provide a way for the U.S. to make payments to its creditors without breaking institutional sanctions or restrictions.

More recently, some have openly said that President Biden aims to delay what many are calling “the death of the dollar” until after the coming election, and FedNow is how they will keep the economy above water until next year. 

Even more conspiratorially, FedNow opposition claims the secret goes deeper, that the FedNow digital dollar is in fact the beginning of a total cashless society, which they perceive as a threat to American citizens' individual freedoms and privacy. 

Policies and decisions coming out of the U.S. have shocked many nations in recent months, and none of the above speculation sounds so outrageous in comparison. For now, there’s no credible evidence to confirm any of these conspiracies, but that doesn’t necessarily mean that all of them are wrong, so keep all these rumors in mind in the coming months.

Conclusion

For international traders and investors, the FedNow digital dollar might strengthen fiat USD in the short term, as agile cross-border transactions may be an attractive option. If the U.S. is planning to allow a default, a digital dollar may also stave off some of the currency catastrophe and keep supply and demand channels open. That may give the stock market a chance at a softer landing.

An institutional transition to crypto will be the first of its kind, and many big investors may simply sit back and watch for a while. Sitting back means less trading volume, which typically means a fall in the price of USD. But beware. Shorting USD prior to the release may create issues for traders with high leverage and limited equity, as volatility is expected no matter which way it goes.

Consider monitoring the charts as often as possible if you plan to trade the trend. The Exness Trade app puts breaking financial news and price notifications in your hand, no matter where you are, and also gives you instant and secure access to your trading account and the global markets. Right now, there’s no better way to monitor and trade USD than on your mobile.

When the media inevitably slides into the FedNow topic in the coming weeks, keep a close eye on a USD chart.

This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.

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Author:

Paul Reid

Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.