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The upcoming instant payment service FedNow from the Federal Reserve will be integrated with Metal Blockchain, as announced by the Metal Blockchain team on May 11. This integration will enable Metal users to swiftly convert funds to stablecoin and vice versa utilizing FedNow’s “send/receive” feature.
Metal Blockchain’s inclusion in the FedNow Service Provider Showcase. Source: FedNow
FedNow is an instant payment system created by the United States Federal Reserve, facilitating continuous, near-instant payments between financial institutions. At present, U.S. residents can only execute instant payments domestically through third-party applications like PayPal and Venmo or via crypto wallets. The Federal Reserve has indicated that the new service is set to launch in July.
Metal Blockchain is a cryptocurrency network established by Metallicus, based on a fork of Avalanche’s code. It was designed to provide compliance-friendly solutions for decentralized finance (DeFi) developers. In the May 11 announcement, Metal developers asserted that the network is “built on the foundation of BSA [Bank Secrecy Act] Compliance,” suggesting that it incorporates identity verification and anti-money laundering capabilities.
According to its documentation, the network includes a subnet referred to as “X-Chain,” which enables developers to implement rules for asset transfers. For instance, a token can be created with stipulations such as “can only be sent to US citizens” or “cannot be traded until tomorrow.”
Cointelegraph was unable to confirm the criteria FedNow employs for integration with the payment system. However, most blockchain networks utilize pseudonymous addresses as user identities, which may be perceived as non-compliant with the Bank Secrecy Act. This could clarify why Metal is among the first blockchain networks recognized as a FedNow service provider.
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In a discussion with Cointelegraph, Metallicus co-founder and CEO Marshall Hayner mentioned that Metal’s integration with FedNow could facilitate the development of interconnected “bank chains,” forming a broader blockchain ecosystem that is secure and independent of oracles. This would enable banks to interact with one another for payment processing and settlement while remaining linked to the FedNow system.
He noted that the integration will also prepare banks for a future central bank digital currency (CBDC) and for “bank-issued stablecoins that can interact within a basket of stablecoin currencies.”
Related: US wholesale CBDC has ‘promise,’ Fed governor says
FedNow has faced criticism from certain U.S. politicians, including Florida Governor Ron DeSantis and U.S. Presidential candidate Robert Kennedy, Jr., who have claimed that it represents an initial step toward a blockchain-based CBDC that could infringe on privacy. The Federal Reserve has refuted any connection between FedNow and a CBDC.
When asked about the controversy, Hayner dismissed the criticisms surrounding CBDCs.
“I believe this controversy is unfounded […] As the same rigor that is applied to the banking system will be applied to CBDC,” he stated.
