Federal Reserve’s FedNow Payments Processing System Illegal and Misguided
The Federal Reserve today announced plans to set up a payment processing system called “FedNow.”
CEI senior fellow John Berlau said:
“The Federal Reserve’s action today to launch a government-run real time payments system called ‘FedNow’ violates the law and will stifle innovation and competition from American entrepreneurs. The Fed’s decision to become a payment processor with the FedNow system is in clear violation of the Monetary Control Act of 1980, which bars the Fed from entering into payment processing unless the service is ‘one that other providers alone cannot be expected to provide with reasonable effectiveness, scope, and equity.’ The innovative payment services that have been launched in recent years by firms such as Paypal, Venmo, Zelle, and forthcoming from the Libra digital asset, show there is no shortage of private sector interest in giving everyone access to faster payments. The Fed’s decision to enter into the payment systems market it also regulates will not only harm competition, it will massively compromise consumer privacy as the Fed – a government entity – will for the first time have direct access to highly sensitive financial information. Jerome Powell and the other members of the Fed’s Board of Governors who voted for this misguided venture should reverse themselves and abandon FedNow right now.”
Read more:
- CEI Joins Coalition Letter to Oppose Federal Reserve’s Real-Time Gross Settlement System
- Berlau: Facebook Libra Highlights Flaws of Fed Foray into Real-Time Payments