In trials now, scheduled to launch in mid-2023.
The most valuable use-case for crypto was prodding the Fed to develop and implement this. If all goes as planned, consider crypto's work done.
That the US is generally slow to roll out this kind of national standard is mostly due to politics and general aversion to government work, not because the US waited for crypto to make the problem "known".
Relatively very few people use crypto for any sort of real-world currency transfer.
By design, the Federal Reserve is semi-independent from the political process in the US and is not government funded. The problem was "known" for years but the threat of crypto played a significant role in finally spurring them into quick action.
The American banking system is currently in a bad, insecure, and expensive state.
Almost nothing is ever really *"free"* --- even though it may appear that way at some level. Crypto transactions are certainly not *"free"*; neither are credit cards.
FedNow may likewise have the appearance of being *"free"* for individuals, it all depends on how banks chose to recover the operating costs.
The American banking system is currently in a bad, insecure, and expensive state.
Bad is subjective. Expensive is accurate --- and slow. This is finally being addressed.
Insecure --- I don't really think this is a big issue. There are issues but on an individual level, very few people actually lose money due to any inherent "insecurity" in the system .
Also fednow does not work outside the US currency system. You can not send USD and receive EUR.
But guess what, there are actually crypto solutions that can do that faster and cheaper than any bank can today. The trick is to go over crypto to bridge different fiat currency so you can exchange USD to EUR without a third party taking a fee for the exchange.
This is projected. Actual cost to consumers will depend on banks and how they choose to recover the cost. As an example, credit card transactions are much, much higher but a lot of consumers consider them *free* because they aren't charged directly.
Yes, some crypto transactions may be cheaper --- for crypto swaps only. But crypto isn't a functioning currency. You can't rent a place to live in crypto-land. Compare apples to apples and look at the overall cost of doing an actual, end to end, real world transaction involving crypto (like paying rent) and 5 cents will start looking more attractive.
Moving currencies across borders between different jurisdictions and currencies that is actually where the problems start and thus this is not cheap and not fast.
People already use crypto as a bridge currency today to transfer "functioning currency" aka fiat.
If you are in lets say Europa and you want to send money to Mexico You buy crypto send it there and sell it there for the local currency (Mexican Peso). This takes only a few minutes if done manually and you get the exchange rate of the market not some bad rate from a bank or payment provider. People do this since many years now circumventing banks and payment providers who would take a huge fee.
Take an individual case and add up all the end to end fees associated with doing this. Most likely, they are still huge.
A lot of these people aren't really saving much money compared to traditional banking. They're doing this for convenience because they can't easily get a bank account or don't want one because they operate outside the system.
Transfer is dirt cheap if you dont use the known high fee blockchains like BTC/ETH. A realistic fee is less then 1 cent per Tx. Then crypt back to fiat same thing 0.1% spread.
Lets assume a worst case and you loose 0.5% for the 2 exchanges and 1 cent for the fee.
So for 100 USD send that would mean 99.49 USD is revived
For comparison moneygram's cheapest option for 100 USD to MXN would cost $2 fee (debit card fees not included and the exchange rate (spread) is unknown they give you whatever they want but certainly not anything better than 0.1%) So $102 send and less than $100 will be received and it takes up to 2 business days while the crypto solution takes minutes.
Worst case example is still 4+ times cheaper while completely ignoring the exchange rate because you cant know in advance. And there are way more exotic currencies than MXN which makes the exchange more expensive. Not for crypto tho. If there is a market you get the real market exchange rate as is.
The global remittance market moves billions with double digit growth yearly. If just a tiny fraction of all people use crypto for this (and they do) their saving sum up to millions.
Could you write them here? Genuinely curious.
It could be that taxes become absurd or abusive in some governments or corrupt officials steal or waste their fair share. It may be that some government wants to prevent certain types of exchanges that the rest of society thinks are actually 'OK' and their government no longer reflects their interest.
For example, my significant other is filipino and in their culture, many leave the country to work internationally because of limited local opportunity. Part of that culture involves many sending money home regularly to their families. Sending that money has limitations and often goes through currency exchanges and other brokers who collect fees off that money. To my SO and their family, these groups are leeches providing no value.
I understand why some of these structures exist (to help reduce money laundering and criminal monetary exchanges, etc.) but most these folks sending money home are doing honest labor and simply trying to support their families abroad but have various middlemen sticking their fingers the pot. Crypto and exchanges could provide a viable route to avoid this and send wealth home with limited interference.
Distributed consensus reduces the power that all centralized entities - whether government or corporate - exert.
1. A friend of mine has a small software consultancy. He usually works within EUR area. All fine and dandy there. Then there was a client in the US, they agreed on a USD rate for his work. He went to his bank to open a USD account, they did additional AML and KYC procedures and just refused to open a USD account. Didn’t even explain why, he’s not doing anything shady. So, the first USD payment went to his EUR account, and got automatically converted at a very unfriendly exchange rate making him lose non-trivial money on that. Now he accepts USDC and converts on an exchange instead.
2. A different friend has a hardware/software business. A client in an African country found them. The African client wanted to use PayPal, as ‘banks are troublesome’. They didn’t accept PayPal as it can be recalled. So they did the transfer through the banking system which stuck in it due to AML for a month. Because, why are you having a payment from Africa? Are you selling drugs? Are they terrorists? They aren’t using crypto, but it sure would help here.
2. Use Western Union.
2. Seriously? The time and expense of this compared to crypto is huge. Again, decentralization > single point of failure.
Being glib about real benefits and use cases is not helping the conversation here.
Regarding two: The transaction cost of crypto might be lower, but carries the risk of losing the full payments as soon as some exchange decides to stop withdrawals.
2. Less sure about this one!
But, yes, Wise would’ve helped here.
Oh well.
Come to think of it, this actually highlights the point very well. People on this thread generally seem to think that international money transfer is fine. I don’t think Wise would have a business case if that was true.
If you mean more efficiently then that is likely a dimension of the solution where it may not fit for some use cases. For example blockchain transactions are known to be slow when compared to say a RDBMS transaction. If you are recording purchases in a web shopping cart its probably not a good solution. The trade-off here is that for some problem, maybe the speed of the transaction is not a concern.
Don't get me wrong, I'm not defending, nor supporting blockchain solutions. Just pointing out that the "we have ways to solve those problems already" isn't a very valid argument in software.