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The latest in financial news: The Federal Reserve has released FedNow and the SEC case Ripple Labs has fallen through

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The FedNow Service has just gone live

The Federal Reserve has just launched the FedNow on July 20, 2023. The FedNow is designed to help speed up transfers between banks and credit unions by allowing for near-instant transfers that are available 24/7 for 365 days a year. This would reduce the lag that the current system uses which takes between 3-5 business days.

While it does offer benefits to US citizens, there are many who fear that FedNow is a precursor to a Central Bank Digital Currency (CBDC). CBDCs are similar to cryptos in that they both use blockchain technology to track and record transactions that happen. Where cryptos were designed to be decentralized, the CBDCs are centralized and owned and operated by governments.

Some of the arguments for CBDCs are that people will have access to their money to use or transfer whenever they want and the CBDC is backed by the government which provides the value of the coin with stability (i.e. it’s pegged to the US Dollar). Some of the arguments against CBDCs is that it allows the centralized agency (e.g. the government) to be able to track and monitor the financial transactions of people. The government also has the ability to stop or cancel transactions that could be deemed “dangerous'“ or “suspicious”. If you’ve ever read 1984, then you know how dangerous governments can be when given too much power.

Ripple Labs Beats the SEC

Late last week, the case against Ripple Labs from the SEC for offering unregistered securities. For those who aren’t following the case, Ripple Labs had sold some of its coin reserves (XRP) on various exchanges to raise money. The SEC pursued legal action against Ripple Labs for selling unregistered securities. Ripple Labs contested that XRP didn’t pass the Howey Test to be classified as a security. The Howey Test states that something is a security if it passes these four parts: (1) an investment of money, (2) in a common enterprise, (3) with the expectation of profit, or (4) to be derived from the efforts of others

The judge ruled that XRP "is not in and of itself a 'contract, transaction or scheme' that embodies the Howey requirements of an investment contract". This is a big case for the crypto industry and hoping this leads to clearer regulations on digital assets for companies.

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