The Federal Reserve’s upcoming instant payment service, FedNow, is set to integrate with Metal Blockchain, according to an announcement made by the Metal Blockchain team on May 11. This integration will enable Metal users to instantly convert funds into stablecoins and vice versa, utilizing FedNow’s “send/receive” feature.
Understanding FedNow and Metal Blockchain
FedNow, a creation of the United States Federal Reserve, aims to provide a seamless platform for banks to conduct immediate, 24/7 payments among themselves. American citizens can only execute such fast domestic transactions through alternative services such as PayPal, Venmo, or cryptocurrency wallets. The highly anticipated FedNow system is set to be introduced in July.
Metal Blockchain, a crypto network created by Metallicus, is based on a fork of Avalanche’s code and was developed to provide compliance-friendly options for decentralized finance (DeFi) developers. The network is reportedly built on the foundation of Bank Secrecy Act (BSA) compliance, suggesting it has integrated identity verification and Anti-Money Laundering features.
The network features an “X-Chain” subnet that allows developers to implement rules for transferring assets. This means tokens can be issued with specific conditions, such as being sent only to US citizens or not being traded until a certain date.
However, most blockchain networks employ pseudonymous addresses as user identities, potentially rendering them non-compliant with the BSA. This may be why Metal is among the first blockchain networks listed as a FedNow service provider.
Future of interconnected “bank chains”
Metallicus CEO and co-founder Marshall Hayner suggested that Metal’s integration with FedNow could facilitate the creation of interconnected “bank chains,” leading to a more extensive, secure blockchain ecosystem that does not depend on oracles.
This would enable banks to communicate and process payments and settlements while remaining connected to the FedNow system. Hayner also stated that the integration would help banks prepare for a potential central bank digital currency (CBDC) and enable “bank-issued stablecoins that can interact within a basket of stablecoin currencies.”
FedNow has faced criticism from some US politicians, such as Florida Governor Ron DeSantis and US presidential candidate Robert Kennedy Jr., who argue that the system is a stepping stone towards a blockchain-based CBDC that could infringe on privacy. The Federal Reserve has denied any connection between FedNow and a CBDC. When asked about the controversy, Hayner dismissed these concerns, stating that the same rigor applied to the banking system would be applied to CBDCs.
