FedNow could remove some of the delays that pushed businesses towards stablecoins, but it still stops at the US border. The real threat to digital dollars will emerge only when national instant-payment systems can talk to each other.
At first glance, FedNow looks like a stablecoin killer.
The Federal Reserve’s instant-payment network moves money between participating US banks within seconds, operates throughout weekends and public holidays and settles transactions in central bank money.
That sounds remarkably similar to the sales pitch for dollar stablecoins such as USDC and USDT: instant transfers, continuous availability and no waiting for the banking system to reopen on Monday morning.
FedNow is also becoming a serious payment rail rather than a small Federal Reserve experiment.
It processed almost five million customer payments worth $274.7 billion during the second quarter of 2026. Transaction volumes increased by more than 83% from the previous quarter, while its maximum payment size has been raised to $10 million. The underlying FedNow fee charged for originating a customer transfer is just 4.5 cents, although banks and payment providers can impose their own charges.
So could FedNow eventually remove the need for stablecoins in international payments?
Our view is that it will certainly challenge some stablecoin use cases. But making stablecoins completely redundant would require FedNow to solve several problems that sit beyond the Federal Reserve’s network.
The most important of these is foreign exchange.
What FedNow Actually Does
FedNow is not a digital dollar, cryptocurrency or central bank digital currency.
It is an interbank payment and settlement service. Consumers and businesses access it through participating banks and credit unions rather than opening a FedNow wallet with the Federal Reserve.
When a payment is sent, FedNow adjusts the balances held by the two financial institutions at the Federal Reserve. The receiving institution must then make the money available to its customer immediately.
The service operates 24 hours a day, 365 days a year, including weekends and holidays. More than 1,500 US financial institutions had joined by the end of 2025, although not every participating bank offers the same send-and-receive services to customers.
This provides the United States with something many countries have had for years: a national infrastructure capable of settling bank payments almost immediately.
But FedNow currently supports only domestic payments between US depository institutions.
A dollar cannot be sent through FedNow directly from a US bank to a British, European, Mexican or Japanese bank.
That limitation is central to the stablecoin debate.
The Federal Reserve Is Opening the Door to Cross-Border Payments
In April 2026, the Federal Reserve proposed changing FedNow’s rules so that participating banks could use intermediaries such as correspondent banks.
Under the current structure, a FedNow transfer can include only two US banks. The proposed change would allow a correspondent bank to facilitate the international part of a payment while FedNow handles its domestic US leg.
This is an important development, but it would not transform FedNow into a global payment network overnight.
Consider a British company sending £100,000 to a supplier in the United States.
Several things must happen:
- Pounds must be collected from the British company.
- The pounds must be exchanged for dollars.
- The international payment must pass between regulated institutions.
- The dollars must reach the supplier’s US bank.
- The supplier must receive the money in its account.
FedNow could make the fourth and fifth stages almost immediate. It does not perform the sterling-dollar conversion, move the money out of the UK or conduct every compliance check required across both jurisdictions.
Even if the Federal Reserve adopts its proposed rule, another provider would still have to bridge the gap between Britain and the United States.
In other words, FedNow could provide a very fast American last mile. It would not yet provide the entire international journey.
Why Stablecoins Have Found a Cross-Border Market
Stablecoins approach the problem from the opposite direction.
Instead of linking national banking systems, they turn money into a token that can be transferred across a blockchain.
A payment company can receive pounds, convert the value into USDC, send the USDC to a wallet or overseas liquidity provider and convert it back into dollars at the destination.
Provided that the necessary banking, compliance and conversion arrangements are available, the blockchain leg can operate continuously without waiting for correspondent banks in several time zones.
Stablecoins can also be combined with smart contracts. A payment could be released automatically when goods arrive, an invoice is approved or another condition is satisfied.
That programmability matters for trade finance, automated treasury management, digital marketplaces and financial assets that already exist on a blockchain.
The Bank for International Settlements found that stablecoins have become core settlement assets within blockchain finance, with individual transactions capable of combining transfers and other programmable operations into one sequence.
Stablecoins also provide access to dollars in countries where businesses and households may not have easy access to US bank accounts.
Approximately 98% of stablecoin value is denominated in dollars, while more than 70% of fiat-to-stablecoin conversions examined in recent BIS research originated from currencies other than the US dollar. Stablecoins are therefore functioning as both payment instruments and an alternative route into dollar exposure.
FedNow cannot replicate that role because it transfers existing bank deposits within the United States. It does not give someone in an emerging economy a portable dollar balance that can be held in a digital wallet.
The Stablecoin Market Is Not Waiting for FedNow
Institutional adoption continued to expand during 2026.
Visa said its stablecoin settlement programme had reached a $7 billion annualised run rate by April and had expanded to nine blockchains. The company has also launched a platform intended to help financial institutions manage the minting, storage, movement and redemption of stablecoins.
Circle launched a managed payment service through which banks, fintechs and payment providers can use USDC for international settlement without holding or managing the digital assets themselves. Circle also connected its payment network with Nium’s payout infrastructure, providing access to more than 190 countries and 100 currencies.
BNY, meanwhile, expanded its relationship with Circle to offer institutional custody together with USDC minting and redemption services.
These developments do not prove that stablecoins will dominate payments. Company announcements naturally emphasise the potential of their own products.
They do show, however, that banks and established payment companies are integrating stablecoins rather than abandoning them in anticipation of FedNow.
US regulation has also become clearer. The GENIUS Act was signed into law in July 2025, creating a federal framework for payment stablecoins, including requirements covering permitted issuers, one-for-one reserves, redemption policies and reserve disclosures.
A more regulated stablecoin market may make these tokens more acceptable to banks and large companies. FedNow is therefore developing alongside increasingly institutional stablecoin infrastructure, not replacing an unregulated market that has stopped evolving.
Where FedNow Could Make Stablecoins Less Necessary
The strongest case for FedNow is not that it can copy everything a stablecoin does. It is that many customers do not actually want a token.
Most people sending an international payment want money to leave one bank account and arrive in another. They do not care whether a blockchain, correspondent bank or instant-payment system handles the transfer behind the scenes.
FedNow could reduce stablecoin demand in several areas.
Bank-to-bank remittances
Where both sender and recipient have regulated bank accounts, an international provider could combine FedNow with another country’s instant-payment system. Customers would receive an immediate account credit without needing a wallet or stablecoin exchange.
Corporate payments into the United States
A payment company could perform the currency conversion offshore and use FedNow to deliver the resulting dollars instantly. That would reduce the value of using a stablecoin for the final US stage.
Domestic stablecoin cash-outs
Even when a stablecoin carries value across borders, FedNow could provide the final conversion into a US bank account. In this scenario, FedNow would not kill stablecoins, but stablecoins might become invisible plumbing rather than something the recipient holds.
Regulated, high-value payments
The $10 million FedNow limitopens the network to larger supplier payments, treasury transfers and commercial transactions. Companies may prefer central-bank settlement when it offers comparable speed and continuous availability.
FedNow also has an important trust advantage. Banks settle using balances at the Federal Reserve rather than relying on a private stablecoin issuer, custodian or blockchain.
For many mainstream transactions, that simplicity will be difficult to beat.
Why FedNow Cannot Make Stablecoins Redundant on Its Own
Cross-border payments are not slow simply because US banks lack an instant domestic rail.
They are slowed by foreign-exchange conversion, liquidity management, sanctions screening, anti-money-laundering controls, incompatible data standards, local banking hours and differences between national regulations.
A faster US payment system solves only one part of that chain.
The BIS identified limited interoperability as one of the most important constraints on cross-border payments. Domestic systems can be extremely efficient while international payments remain expensive because the systems, institutions and compliance frameworks do not connect cleanly.
The Federal Reserve’s experience with FedGlobal ACH also illustrates the importance of demand and distribution. Its ACH services to Mexico and Panama are being discontinued during 2026 after steep falls in transaction volumes. Creating a cross-border facility does not guarantee that banks, payment firms and customers will use it.
Stablecoins avoid the need to create a separate technical link between every pair of national payment systems. A compatible wallet can receive the same token from another compatible wallet.
That does not eliminate the need for regulation or local liquidity. Someone must still exchange the stablecoin for local currency, and that conversion may introduce fees, delays or poor exchange rates.
Stablecoin users also face risks that do not exist in a conventional FedNow transfer:
- the issuer could face financial or operational difficulties;
- a token could temporarily lose its dollar peg;
- a wallet, exchange or custodian could be compromised;
- blockchain fees or congestion could rise;
- liquidity may be split across multiple tokens and networks;
- payments may be difficult or impossible to reverse;
- local regulators may restrict access or conversion.
The GENIUS Act addresses some reserve and issuer risks, but it cannot remove every risk associated with wallets, blockchains, intermediaries and overseas cash-out providers.
The Bigger Threat Is a Global Network of Instant-Payment Systems
FedNow would become a much stronger stablecoin competitor if it were connected directly with overseas instant-payment networks.
That is the idea behind Project Nexus, a BIS initiative intended to give a domestic instant-payment system one standardised connection through which it could reach other participating systems.
The BIS says this model could allow many international payments to reach recipients within 60 seconds, rather than requiring each country to build a customised link with every other market.
Project Rialto has also tested automated foreign-exchange conversion alongside settlement using tokenised central bank money. The experiment successfully simulated payments between different jurisdictions, including transactions requiring a third vehicle currency.
For wholesale markets, Project Agorá has demonstrated atomic multi-currency settlement using tokenised central bank reserves and commercial bank deposits. Swift is separately preparing trials in which 17 banks will use tokenised deposits for round-the-clock cross-border payments.
These projects point towards a future in which the banking system adopts some of the technology that made stablecoins attractive.
The eventual competitor to USDC or USDT may therefore not be FedNow alone. It could be a combination of:
- interconnected domestic instant-payment networks;
- automated foreign-exchange marketplaces;
- tokenised commercial bank deposits;
- tokenised central bank settlement;
- common compliance and identity standards;
- always-open liquidity facilities.
Such a system could offer stablecoin-like speed and programmability while retaining regulated bank money and central-bank settlement.
But it does not exist at global scale today.
Could FedNow Kill Stablecoins? Our Verdict
FedNow will not make stablecoins redundant for cross-border payments in the foreseeable future.
It is a domestic instant-payment system, not a worldwide dollar network. Even under the Federal Reserve’s proposed expansion, FedNow would handle the American portion of an international transfer while correspondent banks, payment companies or other infrastructure complete the foreign portion.
It could still take business away from stablecoins.
In well-banked payment corridors, customers may prefer an immediate account-to-account transfer that avoids wallets, private tokens and blockchain risks. FedNow could also reduce the amount of time payment providers need to hold dollar liquidity and make the US end of an international payment substantially cheaper.
Stablecoins retain advantages where users need portable dollar value, global wallet access, continuous on-chain settlement or programmable payments.
The most likely outcome is therefore a hybrid system.
A British customer may pay pounds from a bank account. A regulated provider could use a stablecoin or tokenised deposit to move value internationally. FedNow could then deliver dollars to the recipient’s US bank within seconds.
Neither customer would necessarily know that a token had been involved.
That may ultimately be stablecoins’ most important role: not replacing every bank account, but becoming one of several invisible settlement layers connecting faster national payment systems.
FedNow is not the end of stablecoins.
It is the beginning of much tougher competition over which technology carries the money between the world’s increasingly instant domestic networks.