US Federal Reserve’s payment system down for more than three hours
The US Federal Reserve suffered a major outage this week which saw its payments systems suffer a shutdown.
For more than three hours, systems remained disrupted, after which, the regulator got the majority of them back up and running. Its systems process more than $3 trillion each day.
As of 2:58pm, the Federal Reserve’s website still reported an “alert” status for several of its service areas. The central bank put the outage down to an “operational error”.
Major US banks rely on the Federal Reserve’s real-time payment settlement system, called “Fedwire”, which took even longer than three hours to get back up and fully running.
In December, Fedwire Funds handled more than 835,000 transactions a day on average. Its daily average dollar volume was $3.4 trillion.
FedACH, which also went down temporarily, processes smaller transactions such as pay checks and tax refunds.
Another reason for CBDCs?
This week, hearings in Washington saw Federal Reserve chair Jerome Powell asked what the central bank was working on in regard to digital currencies.
A central bank digital currency (CBDC) would utilise smart contract technology using blockchain technology, meaning the money being sent to citizens could be automated.
It would also mean banks and citizens could rely on an alternative system to the one which went down on Wednesday.
Congressman Patrick McHenry said this week that a CBDC would be “vital to American competitiveness”.
This year, according to Powell, the Federal Reserve will focus on extensive research and public outreach. Despite calling it a “high priority project”.
He stressed: “We have a responsibility to do this right. We don’t have to be the first.”
So close, yet so far
Back in March 2020, House Democrats considered whether to use digital dollars and digital wallets to expedite the delivery of direct emergency funds to unbanked consumers.
They drafted a bill which, if enacted, would have created a ‘digital dollar’.
The government would then have been able to leverage the same peer-to-peer (P2P) technology underpinning digital currencies to initiate payment clearance faster. Democrats dropped the bill before it could pass into legislation.
However, the mere consideration of such technology on a mass scale showed a huge leap in thinking by Powell. The central bank chair has traditionally opposed the creation of a CBDC.