According to an announcement from the Metal Blockchain team on May 11, the Federal Reserve’s upcoming instant payment service, FedNow, will be integrated with Metal Blockchain. This integration will enable Metal users to instantly convert funds to stablecoin and vice versa using FedNow’s “send/receive” function.
FedNow is an instant payment system developed by the United States Federal Reserve, allowing round-the-clock, near-instant payments between banks. Currently, U.S. residents can only make instant payments domestically through third-party apps like PayPal and Venmo, or through 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 offer compliance-friendly options for decentralized finance (DeFi) developers. Metal developers claimed in the announcement that the network is built on the foundation of Bank Secrecy Act (BSA) Compliance, suggesting it has identity verification and Anti-Money Laundering features incorporated.
The network includes a subnet called “X-Chain” that allows developers to establish rules for asset transfers. For example, a token can be issued with rules such as “can only be sent to US citizens” or “can’t be traded until tomorrow.”
It is unclear what criteria FedNow will use to determine which entities can integrate with the payment system. However, since most blockchain networks use pseudonymous addresses as user identities, they may not be compliant with the Bank Secrecy Act. This could explain why Metal is one of the first blockchain networks to be listed as a FedNow service provider.
Marshall Hayner, co-founder and CEO of Metallicus, stated that Metal’s connection to FedNow could facilitate the development of interconnected “bank chains,” creating a secure blockchain ecosystem without relying on oracles. This will enable banks to communicate with each other for payment processing and settlements while staying connected to the FedNow system. Hayner also noted that it will prepare banks for a future central bank digital currency (CBDC) and “bank-issued stablecoins that can interact within a basket of stablecoin currencies.”
FedNow has faced criticism from some U.S. politicians, including Florida Governor Ron DeSantis and U.S. presidential candidate Robert Kennedy Jr., who argue that it is a step towards a blockchain-based CBDC that could infringe on privacy. The Federal Reserve has denied any connection between FedNow and a CBDC.
Hayner dismissed the controversy surrounding CBDCs, stating that he believes the concerns are unfounded, as CBDCs will be subject to the same regulatory scrutiny as the traditional banking system.