Blockchain
The Federal Reserve’s forthcoming instant payment service FedNow will be integrated with Metal Blockchain, according to a May 11 announcement from the Metal Blockchain team. The announcement said the integration will allow Metal users to instantly convert funds to stablecoin and back again using FedNow’s “send/receive” feature.
FedNow is an instant payment system developed by the United States Federal Reserve. It enables almost instant payments between banks 24 hours a day. Currently, US residents can only make direct payments domestically through third-party apps such as PayPal and Venmo or crypto wallets. The Federal Reserve has stated that the new service will begin in July.
Metal Blockchain is a crypto network developed by Metallicus, based on a fork of Avalanche’s code. It was created to provide compliance-friendly options for decentralized finance (DeFi) developers. In the May 11 announcement, Metal developers claimed the network is “built on the foundation of BSA [Bank Secrecy Act] Compliance,” implying it has built-in identity verification and anti-money laundering features.
According to the documents, the network has a subnet called “X-Chain” that allows developers to create rules for transferring assets. For example, a token might be issued with a rule that it “can only be sent to US citizens” or “cannot be traded until tomorrow”.
Cointelegraph was unable to verify what criteria FedNow uses for integration with the payment system. However, most blockchain networks use pseudonymous addresses as user identities, which means they can be seen as not complying with the Bank Secrecy Act. This may explain why Metal is one of the first blockchain networks to be listed as a FedNow service provider.
Speaking to Cointelegraph, Marshall Hayner, co-founder and CEO of Metallicus, said Metal’s integration with FedNow could enable the formation of interconnected “chains of banks,” creating a larger blockchain ecosystem that is secure and not dependent on is from oracles. This allows banks to communicate with each other to process payments and settle settlements while remaining connected to the FedNow system.
He stated that the integration will also allow banks to prepare for an eventual central bank digital currency (CBDC), as well as “bank-issued stablecoins that can interact within a basket of stablecoin currencies.”
FedNow has been criticized by some US politicians, including Florida Governor Ron DeSantis and US presidential candidate Robert Kennedy, Jr., who have argued that it is a first step towards a blockchain-based CBDC that they believe violates privacy. The Federal Reserve has denied that FedNow is related to a CBDC.
When asked for his opinion on the controversy, Hayner dismissed these criticisms of CBDCs.
“I believe this controversy is baseless […] Because the same rigor applied to the banking system will be applied to CBDC,” he said.