The Federal Reserve’s FedNow will integrate with the Metal Blockchain

The Federal Reserve’s upcoming 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 allows for round-the-clock, almost instant payments between banks. Currently, US residents can only make instant payments domestically through third-party apps like PayPal and Venmo or crypto wallets. The Federal Reserve has stated that the new service will launch 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 that the network is “built on the foundation of BSA [Bank Secrecy Act] Compliance’, suggesting it has identity verification and anti-money laundering features built in.

According to the documents, the network has a subnet called “X-Chain” that allows developers to adopt rules for transferring assets. For example, a token may be issued with the rule that it “can only be sent to US citizens” or “cannot be traded until tomorrow.”

Cointelegraph could not confirm 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 non-compliant 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.

In a conversation with Cointelegraph, Metallicus co-founder and CEO Marshall Hayner said that Metal’s integration with FedNow could enable the formation of interconnected “bank chains,” creating a larger blockchain ecosystem that is secure and does not rely on oracles. This will allow banks to communicate with each other to process payments and handle 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 for “bank-issued stablecoins that can interoperate within a basket of stablecoin currencies.”

Related: US wholesale CBDC has ‘promise’, says Fed governor

FedNow has been criticized by some US politicians, including Florida Governor Ron DeSantis and US presidential candidate Robert Kennedy, Jr., who have claimed it is a first step towards a blockchain-based CBDC that they say will infringe on 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 think this controversy is unfounded […] As the same rigor applied to the banking system will be applied to the CBDC,” he said.