> Is this akin to government-backed Venmo, or something?
Yes, exactly. But you have to keep in mind that this is a two-edged sword. On the one hand, it's going to be convenient and probably secure. On the other hand, it's going to let the government see every transaction you make, which for some people will be a very high price to pay.
> On the other hand, it's going to let the government see every transaction you make
Can you go into more detail here on what you think will change from the status quo? Existing bank transfers are obviously not secret from the government on request. While the government doesn't have direct access to run search heuristics on the whole dataset they just delegate that to the banks' internal compliance team.
If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top. Unlike with the banking system where different banks have different prices for wires - or even free under certain conditions - you can't "shop around" for a new government.
Further, if a government determines you are not an "acceptable" participant, they have the ability to stop transactions to/from you.
*Ability doesn't necessarily translate to authority - you can probably fight it - but the government's legal fees are paid by us so they're effectively unlimited.
> If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top.
If the federal government wants to tax things they indeed can. But I was asking about a chance from the status quo.
If you owe the US government money right now they can take it out of your bank account.
> Unlike with the banking system where different banks have different prices for wires - or even free under certain conditions - you can't "shop around" for a new government.
You can shop around for a different bank but it will still follow US law and also go above and beyond to help out the feds.
> Further, if a government determines you are not an "acceptable" participant, they have the ability to stop transactions to/from you.
> *Ability doesn't necessarily translate to authority - you can probably fight it - but the government's legal fees are paid by us so they're effectively unlimited.
Yes but your legal remedies might actually be better under FedWire. US fourth amendment law has a massive loophole whereby if a private business "voluntarily" assists the government it doesn't count as a search. So if the government searches your government bank account you'll have potentially better remedies than if they ask your private bank to pretty please send a printout. (and there's very little chance your current bank tells the feds to shove off and come back with a warrant in that kind of situation)
If the government could stop cash transactions entire classes of crime would be significantly more impractical (while at the same time significantly invading the privacy of all citizens).
> But I was asking about a chance from the status quo.
> If you owe the US government money right now they can take it out of your bank account.
Yes, but they can't see your transactions unless they go ask your bank. Now, they could do that, but they're not set up to do this for all transactions. FedNow changes that for all transactions within FedNow. The government wouldn't start taxing transactions until FedNow is the only game in town or all other payment systems also give them that kind of visibility.
As well, with FedNow they get real-time transaction visibility, which is very different from getting non-real-time batched transaction data from banks.
> Yes but your legal remedies might actually be better under FedWire. US fourth amendment law has a massive loophole whereby if a private business "voluntarily" assists the government it doesn't count as a search. So if the government searches your government bank account you'll have potentially better remedies than if they ask your private bank to pretty please send a printout. (and there's very little chance your current bank tells the feds to shove off and come back with a warrant in that kind of situation)
>wouldn't start taxing transactions until FedNow is the only game in town or all other payment systems also give them that kind of visibility.
....Or they can just demand banks immediately start taxing transactions per merchant codes _right now_ without FedNow. And the banks would comply. They don't need real time visibility. The bank could take money off the top and/or send the tax form required to you at the end of year and IRS just like anything else. It would just be similar to Form 8949.
> If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top.
The Federal Reserve isn't the government. Yes, if they want to charge a fee for this service, they could. The same is true of every existing money-moving mechanism.
> Unlike with the banking system where different banks have different prices for wires - or even free under certain conditions - you can't "shop around" for a new government
FedNow is essentially free[0]. If FedNow imposes a higher fee in the future, you can always choose to use other services (ACH, wire payments, etc.). It's a competitive market.
> Further, if a government determines you are not an "acceptable" participant, they have the ability to stop transactions to/from you.
This power already exists. FedNow doesn't change it one way or the other.
It won't be any worse or better than existing federally administered systems. The government already oversees all the major existing bank-to-bank transfer systems mentioned in the press release. In the US banks charge different wire fees because they can as a competitive matter, but they all use FedWire to talk to each other. Just like they can impose arbitrary limits on ACH transfer size but they all use FedACH to handle the actual transfer. This one is just a faster, more secure version of the latter.
> If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top.
They have no authority to do this unless you're subject to a tax witholding order. The government cannot collect taxes on arbitrary transactions as they occur - it can levy taxes, and then attempt to collect them (it hopes via voluntary payment by taxpayers).
You, like so many other commenters here, seem to fail to grasp that FedNow is a replacement for ACH, the existing inter-bank exchange system that already involves the Federal Reserve to precisely the same extent that ACH already does.
> If the government wants to tax these transactions - and let's admit it, they do - they'll take it right off the top
the implied alternative being they don't take it automatically and now it's your responsibility to figure it out and pay it? Or is the alternative that you would not pay it if it were not automatic, aka tax fraud?
It lowers the cost of the government performing wide surveillance of financial activity; the fear is that lowering this cost will enable more advanced forms of detection and enforcement that ultimately look and feel like harassment.
As mentioned by a few folks elsewhere in these comments, if FedNow is wildly successful and takes a meaningful portion of payments, it centralizes information about lots of peoples' financial activity in one place, across banks and across payment platforms. This potentially leads to FedNow being a one-stop OLTP shop for governments to run queries against realtime data, or even build stream processing agents that filter or take action on patterns.
Currently, it would be more difficult to build this database as it's hodgepodged together from suspicious activity reports and subpoenas. There's of course the unknowable possibility that law enforcement and security agencies have secret ways of building a comprehensive realtime dataset - but, if they do exist, their secret nature reduces the scope of situations in which they can be used.
ACH is slow and coarse, FedNow is capable of being realtime and fine-grained. Two institutions might have one giant ACH per day between them that includes a ton of smaller transactions that are all invisible to the ACH system itself.
What does the timing have to do with visibility though? What government move is quick enough for that to matter? Do you really believe that if “the government” wants to look at money flow they won’t do it until FedNow is live? Each transaction is tracked by an ID accessible by people in the system, not sure why you men by “invisible”.
Venmo doesn’t use ACH when moving from Venmo to Venmo. And is the same with FedNow. If you send money from BankA account to bankB account, that’s an ACH transaction and it’s recorded as such. Same with Fed now.
Right, these concerns are predicated on apps built natively on FedNow gaining market share to rival Venmo enough that these transactions are no longer opaque. If everybody uses it the same way they use ACH, there's no difference to the state of the world today.
The magnitude of the change is somewhat in the eye of the beholder. On the one hand, the government already has a lot of visibility into your finances. On the other hand, this removes some friction that currently exists for certain kinds of transactions. This matters more to some people than others. There is also concern that this might be a step towards the eventual elimination of cash.
I find it annoying that we have these endless debates in the US where it's assumed that if there's some magnitude it of course must be more than epsilon.
I would be interested in if anyone can give a example where the friction increases in such a way as a person would experience an actual difference, or how this would actually make cash easier.
Otherwise this sounds to me like the endless silly arguments against a national id card by people. (State ID cards that then go into a federal database are no more private but come with annoying downsides like ID.me)
I wrote a comment on another thread today about this wrt surveillance. Reduced friction in surveillance definitely is something to be feared, as the evidence is that if the government/police/alphabet agencies can use a power (literally, not necessarily legally), they will. The only thing holding them back in the pre-digital age was the high cost of physical surveillance and even data storage, when "files" were things you held. The difference in quantity of possible surveillance has become a difference in quality, where it's just "common sense" that the government can easily pull your movements from cell tower records, and that they'll do so regardless of whether they're allowed to (or say "terrorism!" allows them to)
Automated surveillance and automated interference. If you think YouTube's algorithms for determining copyright or Facebooks algorithms for "community standards" are bad, wait until you have your bank account locked and can't buy food.
I don't see how this is much different than the current situation. The Fed already processes ACH transactions (basically all bill-pay, most transfers to/from Paypal/Venmo etc), and all wire transfers (most high dollar money transfers)
The government can already see all your ACH transactions like payroll, rent, etc because the Fed Reserve literally runs ACH. This also isn't replacing credit cards or the like, so it is basically an ACH replacement.
That's on top of reporting requirements banks already have for your transactions.
The Fed only runs FedACH, which is one of two ACH networks running the same protocol. The other is The Clearing House Payments Company's Electronic Payments Network. Indeed there used to be more private network operators, but the other two eventually folded, leaving just these two remaining.
Put the flag of North Korea into the notes of a venmo transaction. You will very quickly find out the extent to which the government knows what you are doing with your money.
Thats actually a private corporation having an excessively skittish interpretation of federal regulations.
The government would still need to go out of their way to know about that transaction. And the liability would only come after you or the organization got in trouble for something else.
which once again has nothing to do with the government and everything to do with Venmo incorporated (Paypal Inc.) choosing to operate that way out of fear of the government
Current finance laws are such that if PayPal stopped having this kind of fear of the government it would likely go under. It's just a loophole to get around the 4th amendment.
> > Is this akin to government-backed Venmo, or something?
> Yes, exactly. But you have to keep in mind that this is a two-edged sword. On the one hand, it's going to be convenient and probably secure. On the other hand, it's going to let the government see every transaction you make, which for some people will be a very high price to pay.
Yes, exactly. But you have to keep in mind that this is a two-edged sword. On the one hand, it's going to be convenient and probably secure. On the other hand, it's going to let the government see every transaction you make, which for some people will be a very high price to pay.