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FedNow and the Digital Dollar

FaithFi: Faith & Finance | May 12, 2023

Show Notes

The Federal Reserve Bank recently announced a new instant payment platform called “FedNow,” and it will allow businesses and even individuals of participating banks to send and receive instant payments, 24/7. But is it the “camel’s nose in the tent” for a digital dollar? We’ll talk about it on this Faith and Finance. 

  • Before we get into this discussion of digital currency, it’s important to remember Proverbs 15:14. It reads, “The heart of him who has understanding seeks knowledge, but the mouths of fools feed on folly.”
  • The point is, let’s not panic about a digital currency that isn’t here yet and would have to meet with approval by what is now an often hopelessly divided Congress. The Constitution gives Congress sole power over the currency of the United States. The Federal Reserve has no authority to create currency, digital or otherwise, on its own.
  • Obviously, a digital dollar would be an electronic form of the U.S. dollar. It would be fiat money, as is the current dollar, meaning it’s not backed by gold or silver. It would be similar to cryptocurrencies, but with one big difference— it would be regulated and backed by the Federal Reserve.
  • And that’s the major concern of many opponents of a digital currency. It would potentially give the Fed unprecedented power over our financial system. Theoretically, all transactions could be monitored unless strict limits are placed on the Fed’s ability to snoop and share that information with other agencies.
  • Also, again, in theory, the Fed could use this power to actually shape society, by allowing or restricting certain transactions. So fears of a digital currency are not without some foundation.
  • However, since other countries are moving ahead with digital currencies, some at a rapid pace, it’s likely that the U.S. will have a digital dollar— someday. When that might happen is anyone’s guess, and it could be years away.
  • You can expect a lot of debate in the House and the Senate before a digital currency is ever approved by those bodies. And you’ll have a say in it, too, by contacting your elected representatives, and ultimately, in the voting booth. So again, let’s not panic.
  • Now, it’s true that last year, the Biden administration charged executive agencies to explore the process of implementing a digital currency, and the Fed is cooperating in that effort. 
  • But the Central Bank is also warning that there are risks with a digital dollar that could leave customers vulnerable to theft and fraud.
  • Specifically, policymakers and the Fed have listed several requirements for a digital dollar that won’t be easy to meet. It must provide benefits to U.S. households, businesses, and the overall economy that exceed its costs and risks.
  • It must also yield those benefits more effectively than our current currency. It should complement— not replace— other forms of money, and it must protect consumer privacy and prevent criminal activity. So at least at this point, the Fed is not exactly a cheerleader for a digital dollar.
  • That should be welcoming news to people who fear the Fed is conspiring to take away their privacy and freedom, but it hasn’t stopped opponents of digital currency from calling the FedNow platform “the camel’s nose in the tent,” which means once the nose is in, the whole camel’s going to be in there soon.
  • Concerns about FedNow— set to launch in July— have spread like wildfire on social media. One example is a tweet by Robert F. Kennedy, Jr, who is a presidential candidate for 2024. He claimed that FedNow itself is a central bank digital currency that will allow the Fed to monitor and restrict people's financial transactions.
  • Kennedy wrote, “The Fed just announced it will introduce its 'FedNow' Central Bank Digital Currency in July. CBDCs grease the slippery slope to financial slavery and political tyranny.”
  • Another Instagram poster wrote, "Better get your money out of banks. CBDC has started, meaning you will wake up one morning and all your US paper dollars will be converted into US digital dollars."
  • Of course, the Fed flatly denies this.
  • Testifying before Congress this month, Fed Chairman Jerome Powell said, “We’ll have real-time payments in this country very, very soon.” But he also told lawmakers the Fed is nowhere close to having a digital dollar.
  • So those are the facts about FedNow and a future digital dollar, as we have them today. We hope they clear up some of your questions.

On this program, Rob also answers listener questions: 

  • Are annuities a wise investment? 
  • Would it be wise to take some money out of savings and put it into CDs?
  • Do you have to pay taxes on money from a settlement? 
  • Should you take money out of a 401k to pay off debt? 


Remember, you can call in to ask your questions most days at (800) 525-7000. Also, visit our website at FaithFi.com where you can join the FaithFi Community, and give as we expand our outreach. 

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