Rohit Chopra, a commissioner of the United States Federal Trade Commission, wrote to the Federal Reserve’s Board of Governors stating that the nation’s central banking system should launch its ‘FedNow Service’ ahead of Facebook’s Libra. The FedNow service represents a real-time payment system that was announced in August and is originally set to launch in 2023 or 2024.
Chopra’s letter, sent on the 7th of November, states that the Federal Reserve should launch the FedNow system in order to prevent disruptive projects, mainly from private companies such as Facebook, from removing themselves from the Reserve’s oversight authority.
“As large private firms on Wall Street and Silicon Valley seek to leverage their market power through control of critical infrastructure, it is more important than ever for the Board to implement this proposal quickly,” wrote Rohit Chopra.
While it is still uncertain whether Facebook’s global cross-border payment system will even launch in the end due to it being met with unprecedented regulatory scrutiny, the domestic FedNow Service will arrive in the next few years and has been developed since 2018. Created for both individuals and companies, the users of the Federal Reserve’s new system will gain more flexibility as they can send payments and manage their funds at all times.
Although it is for U.S. citizens only, the system will still provide a significant digital overhaul that could compete with Libra and similar projects. In the case that Facebook successfully launches Libra, the digital asset would be under the oversight of the U.S. Federal Reserve.
However, Chopra is uncertain about the degree and efficiency of the entity’s oversight, which would be conducted through the Automated Clearinghouse Services (ACH) system. Despite the potential of Facebook creating a monopoly on electronic payments systems, the misuse of data remains one of the key issues and can be attributed to Facebook’s previous controversies.
Regarding the risks that Facebook specifically offers, a concern which is shared by both Governor Lael Brainard and Federal Reserve Chairman Jerome Powell, commissioner Rohit Chopra stated the following:
‘The Laundry List of risks raised by the Libra project will take time to unpack and address. But Regardless of Libra’s ultimate fate, the proposal’s emergence underscores the appetite for real-time payments and the urgency of intervention by the Federal Reserve.”
The Federal Reserve and all key participants in the monetary policy of the U.S. have a warranted concern about a private company such as Facebook launching a large-scale digital payment system. However, their concern may cause them to override their authority and put projects such as Libra to a complete halt in favor of their government-issued centralized solutions. In either case, the world will still face a revolution in terms of digital payments in the next few years.