Byline: Hannah Parker
Photo by: Etienne Martins on Unsplash
An instant payment service by the United States Federal Reserve, FedNow, has added Hedera Hashgraph to its list showcasing service providers. The move by FedNow to include a company fuelled by distributed ledger technology (DLT) into its ecosystem has significantly drawn market attention.
In August 2023, on FedNow’s official page, we saw the addition of Dropp, a micropayments platform built on Hedera, to its FedNow Service Provider Showcase section. This move aims to link financial institutions, businesses, and potential service providers.
Overview
According to FedNow’s website, Dropp is a digital solution that deals with the needs of merchants seeking efficient avenues for payment acceptance methods. In addition, the company utilises DLT and regulated banking technology to develop a solution that empowers merchants to accept payments without incurring high transaction fees, marking an exit from traditional payment channels.
Dropp showcases value, excellence and creativity in global technological innovation in financial services. While the new update shows the growing recognition of DLT’s potential, it is essential to note that the Federal Reserve remains cautious, emphasising that the materials are presented as a convenience to potential FedNow service participants. FedNow said, “Federal Reserve Financial Services (FRFS) is merely the host for the showcase and does not support or endorse any showcase providers, and the inclusion or exclusion of a provider should in no way imply any recommendation or endorsement by FRFS”.
Meanwhile, some crypto community members criticised the new development, stating that people may have given up on the concept of crypto being an alternative to the corruption in financial systems. Five days ago, Canada employed Chainalysis software to combat crypto crimes. According to experts at Crypto Minded, a community member shared their thoughts on the new development and conveyed feeling hopeless as people cheered on the new partnership. @Killertimme posted, “People care about pumping their bags. Only a small minority is concerned with the true purpose of crypto. It’s unfortunate but to be expected”. According to the platform, it is understandable that people are attempting to improve their financial circumstances, but this should not come at the expense of a fair and transparent financial system.
Background of the Project
Nevertheless, earlier this year, other networks announced they would integrate into the FedNow service but vanished from the site days after being added. In May 2023, Metal Blockchain, a layer zero platform, announced that it would connect to the FedNow service. The integration would enable users to instantly convert finds to stablecoin and back again using FedNow’s send/receive function.
Metal Blockchain was created to offer compliance-friendly options for decentralised finance (DeFi) developers, and the announcement mentioned that the network was built on the foundation of Bank Secrecy Act (BSA) compliance which meant that it had identity verification and Anti-Money Laundering features built in. The network featured a subnet called X-Chain that enables developers to enact rules for transferring assets. Co-founder and CEO of Metallicus, Marshall Hayner, mentioned that the connection to FedNow could allow the formation of interconnected bank chains and create a safer, higher blockchain ecosystem.
Hayner emphasised that Metal Blockchain connection to the FedNow system will enable banks to liaise with each other to process payments and handle settlements while preparing banks for an eventual central bank digital currency (CBDC). Despite this, the service provider’s presence was short-lived, as it was removed from the website after a few days. In June 2023, FedNow released its list with no blockchain networks on the list despite having announced that they would connect to the instant payment system.
FedNow mentioned that some organisations not on the list might be integrated later on, and Metallicus still intends to integrate with FedNow once it obtains the appropriate bank sponsor. Hayner said, “Metallicus is currently in communication with the Federal Reserve and the FedNow program administrators while we seek the appropriate bank sponsor and stay focused on building our bank chain technology”. In July 2023, the Federal Reserve clarified that its new service for instant payments between organisations and the FedNow Service had no relation to central bank digital currencies (CBDCs).
The central bank mentioned that CBDCs do not power instant fiat payments and real-time gross settlements. The announcement of FedNow adding a company fuelled by DLT on Monday boasted the Hedera Hashgraph (HBAR) token as it skyrocketed to a significant 16,58% hike over the past 24 hours.HBAR is not the only platform that demonstrated this noteworthy upswing; other leading cryptocurrencies, including Bitcoin (BTC) and Ethereum (ETH), remained stable in their trading performance.
The addition of Dropp as a distributed ledger technology-fuelled participant in FedNow’s Service Provider Showcase signals an increasing willingness to embrace technological innovation. FedNow aims to link financial institutions and businesses with service providers that can assist them in implementing and innovating instant payment products.
