The objective is to block Libra, the crypto-project of the social media giant Facebook, which would be launched in 2020.
Rohit Chopra, Commissioner of the Federal Trade Commission (FTC), recently wrote an open letter to Federal Reserve Chairman, Jerome Powell, to launch a real-time payment system called FedNow. The intention is to block Facebook’s crypto-project, Libra.
According to Chopra, the private sector has not been able to meet the need for faster means of payment for users. Additionally, different governments reject Libra since Facebook, the company that will launch said asset, has a lot of information of its users and, as the US Government comments, it would be “risky” if the company obtains much more private information.
However, a public version of Libra, but launched by the government, could meet the expectations of users or not. The crypto-community look for decentralized platforms and means of payments or projects launched by governments could be more regulated than users’ aspirations.
But Chopra urges the Federal Reserve to launch FedNow to develop another option for users, even when it is likely to take until 2023 to launch the asset.
Commissioner Chopra proposes to stop a private payment “monopoly” by creating a public sector monopoly. But, in different cases and all around the world, private monopolies have also been conducted well.
The Federal Reserve is currently examining the potential of the high-speed payments system suggested by FTC.
Joining other government officials around the world, Chopra criticized Libra, the new Facebook’s cryptocurrency project.
“The vague and scant details on the tech platform’s proposed shadow global central bank have sounded international alarm bells, particularly in light of Facebook’s ongoing scandals and reputation for abuse (…) The laundry list of risks raised by the Libra project will take time to unpack and address. I share the serious concerns raised by Chairman Jerome Powell and Governor Lael Brainard”, Chopra wrote.
The Chairman sees the high demand of those who look for fast payments. For that reason, he considers that FTC will have a great opportunity in that sector.
However, it is not clear what FedNow is looking for. There is not information about how the project will operate or when it will be ready to apply it. But some media report that the project will be ready for 2024.
Until the moment, there is not information about which technology will use FedNow. Two US lawmakers wrote to the Fed to inquire about its views toward the technology.
The letter sent by the Commissioner says that by establishing a public competitor, “the Federal Reserve will ensure that small banks, credit unions, and other new entrants can access and build upon the payments infrastructure of the future”.
To conclude, Chopra considers that the Federal Reserve must play a role as a public competitor to prevent a megabank monopoly over a “core function” of its financial system.
“As large private firms on Wall Street and Silicon Valley seek to leverage their market power through control of critical infrastructure, it is more important than ever for the Board to implement this proposal quickly”, he said.
Hence, implementing a faster means of payment would maintain the supremacy of dollars in international transactions and would avoid a “monopoly” of private companies such as Facebook, which is trying to overcome obstacles and finally launch its digital and global currency.
Central banks and governments continue venturing into digital payments in real time and in the world of cryptocurrencies.
By María Rodríguez