CBDC vs. FedNow: The Evolution of US Payments

Comparing Central Bank Digital Currency (CBDC) with FedNow involves contrasting two distinct initiatives aimed at modernizing payment systems and enhancing financial accessibility in the United States. Let’s delve into the key differences between CBDC and FedNow.

CBDC vs. FedNow

Key Differences

Feature CBDC FedNow
Issuer Issued by the central bank. Operated by the Federal Reserve as a payment infrastructure service.
Regulatory Framework Operates within the existing regulatory framework governing central banking and monetary policy. Operates within the regulatory framework governing payment systems and financial stability.
Scope Offers a broader range of use cases beyond instant payments, including retail transactions, remittances, and financial inclusion initiatives. Primarily focuses on enabling instant payments between financial institutions.
Technology Can be implemented using various technologies, including blockchain and DLT. Utilizes modern payment infrastructure and technology tailored to the needs of financial institutions.

Detailed Comparison

Central Bank Digital Currency (CBDC)


  • CBDC is a digital form of a nation’s fiat currency issued and regulated by the central bank, designed to facilitate secure and efficient digital transactions.
  • It represents a digitized version of traditional currency, allowing for peer-to-peer transactions, retail payments, and government disbursements in digital form.

Issuance and Regulation

  • CBDC is issued and regulated by the central bank, providing a sovereign-backed digital payment instrument that complements existing forms of money.
  • It operates within the existing regulatory framework governing monetary policy, financial stability, and consumer protection.

Technological Infrastructure

  • CBDC can be implemented using various technologies, including blockchain, distributed ledger technology (DLT), or centralized databases.
  • The technology behind CBDC aims to ensure secure, scalable, and interoperable digital transactions while maintaining central bank control over monetary policy.

Use Cases

  • CBDC offers a wide range of use cases, including digital payments, remittances, cross-border transactions, and financial inclusion initiatives.
  • It can drive innovation in financial services, streamline government disbursements, and enhance access to digital financial services for underserved populations.



  • FedNow is a real-time gross settlement (RTGS) service being developed by the Federal Reserve to enable instant payments in the United States.
  • It represents a critical infrastructure upgrade to the existing payment system, providing financial institutions with the ability to settle payments instantly, 24/7/365.

Issuance and Regulation

  • FedNow is operated and regulated by the Federal Reserve, serving as a centralized payment infrastructure for financial institutions to settle transactions in real-time.
  • It operates within the regulatory framework established by the Federal Reserve and other relevant authorities governing payment systems and financial stability.

Technological Infrastructure

  • FedNow utilizes modern payment infrastructure and technology to facilitate instant payments, including APIs, ISO 20022 messaging standards, and secure communication protocols.
  • The technology behind FedNow aims to enhance the speed, efficiency, and resilience of the U.S. payment system, reducing settlement risk and improving overall financial stability.

Use Cases

  • FedNow primarily serves as a critical infrastructure upgrade for financial institutions, enabling them to offer instant payment services to their customers.
  • It supports a wide range of use cases, including person-to-person (P2P) payments, business-to-business (B2B) transactions, bill payments, and emergency disbursements.

The Road Ahead: Challenges and Opportunities

  • Interoperability: Making CBDCs and real-time payment systems work together across borders is a challenge, but not an impossible one.
  • Regulation: Clear and adaptable regulations are needed to support innovation while protecting consumers.
  • Cybersecurity: Staying ahead of cyber threats is crucial for the security of both CBDCs and FedNow.


While both CBDC and FedNow aim to modernize payment systems and enhance financial accessibility, they differ in terms of issuer, regulatory framework, scope, and technology. CBDC represents a digitized form of traditional currency issued by the central bank, while FedNow serves as a real-time payment infrastructure operated by the Federal Reserve. Both initiatives play a crucial role in advancing the future of payments in the United States, addressing the evolving needs of consumers, businesses, and financial institutions.

Frequently Asked Questions

  • Is cash being replaced by CBDC? “In island economies, cash is expensive to distribute. CBDCs can replace it,” she stated on Wednesday at the Singapore FinTech Festival. In more developed economies, they can provide resilience. And in areas where few people have bank accounts, they help enhance financial inclusion.
  • Which banks won’t make use of FedNow? As of the Fed’s most recent list of participants, four of the country’s ten biggest banks—Bank of America, Citigroup, PNC, and Capital One Financial—remain unregistered on FedNow.
  • Does FedNow resemble UPI? While both FedNow and UPI (Unified Payments Interface) are electronic payment systems, their underlying technologies and operational regions differ. The National Payments Corporation of India (NPCI) created the extensively utilized UPI payment system in India.

Maxwell Peterson

Maxwell Peterson is a distinguished cryptocurrency expert, hailing from San Francisco, California. He holds a Bachelor of Science in Computer Science from Stanford University and a Master's in Financial Technology from the University of Edinburgh. His passion for blockchain technology and its potential to revolutionize the financial industry has driven him to become a leading voice in the cryptocurrency community. Maxwell is committed to making complex financial concepts accessible to a broader audience, dedicating his career to educating people about the benefits and intricacies of cryptocurrencies.

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