Kansas City Federal Reserve President Jeff Schmid told an audience at the Hoover Institution that the United States’ instant‑payment infrastructure, led by the FedNow service, is set to become the primary channel for real‑time settlement of domestic transactions.
FedNow’s growth and scale
FedNow, launched in July 2023, processes instant credit‑push transfers that settle in central‑bank funds. By October 2026, 1,949 financial institutions – covering roughly half of demand‑deposit accounts – were participating in the network. In the third quarter of 2026, the system handled 6.38 million transactions valued at $370.9 billion, with record volumes reported later in the year.
Projected payment volumes
Schmid highlighted industry estimates that daily U.S. payment flows could reach between $5 trillion and $10 trillion, all settling in real time. He said this shift will make liquidity and duration management central to banking operations.
Tokenized deposits as a bridge
The Fed president described tokenized deposits – traditional bank deposits represented as digital tokens – as a way to combine the programmability of crypto assets with the safety of the regulated banking system. He suggested that such tokens could help normalize real‑time settlement without moving funds outside the banking sector.
Stablecoins and regulatory context
Schmid’s comments come after the GENIUS Act of 2025 established a regulatory framework for dollar‑pegged stablecoins. While the legislation aims to give stablecoins a clearer legal footing, Schmid argued that the Fed’s own infrastructure remains the more natural venue for everyday money movement.
Implications for banks and crypto
If banks issue tokenized versions of insured deposits, they could capture some of the functionality that attracts crypto users while keeping funds within the regulated system. This could intensify competition between bank‑issued tokens and private stablecoins.
Schmid emphasized that his remarks reflect a direction of travel rather than a formal policy decision, and that FedNow’s coverage, while significant, does not yet encompass all U.S. payment activity.
