Kansas City Fed President Jeff Schmid has made his bet on the future of US payments. He thinks instant payment systems, especially the Fed’s FedNow service, will outrun digital asset payment tools such as stablecoins and blockchain platforms. He spoke at the Hoover Institution and repeated the point in interviews.
What Schmid said
His argument is simple. Real-time settlement is becoming the default for US payments, not a premium add-on. Daily US payment flows are projected at $5 trillion to $10 trillion, all settling in real time. That changes bank operations. Schmid said liquidity and duration management will become central to banking work soon. For treasury teams, end-of-day netting may no longer be enough to smooth mismatches. Liquidity becomes a continuous job.
He also pointed to tokenized deposits. These are regular bank deposits in digital token form. They keep money inside the regulated banking system while adding some programmability. In his view, they could make real-time settlement the norm. That matters because banks could then offer a tokenized product that competes with private stablecoins without leaving the banking system.
FedNow by the numbers
FedNow launched in July 2023. It handles instant credit-push transfers, where the sender starts the payment. Those transfers settle in central bank funds. Adoption has grown. As of October 2026, 1,949 financial institutions were participating. Those banks and credit unions cover about half of US demand deposit accounts, the checking accounts most people use. Volume has followed. In Q3 2026, FedNow processed 6.38 million transactions worth $370.9 billion. Record volumes were reported by late 2026.
Stablecoins and the bank angle
Schmid’s comments come after the GENIUS Act of 2025 created rules for payment stablecoins. The law gave dollar-pegged tokens a clearer legal footing in the US. It was meant to help stablecoins compete as a payments tool. Schmid’s view suggests the Fed sees its own systems as the more natural home for everyday money movement, whether or not stablecoins are regulated.
Tokenized deposits are the wildcard. If banks can offer tokenized versions of insured deposits, they might absorb some of the programmability crypto users value. That would sharpen competition between bank-issued tokens and private stablecoins. Schmid’s framing suggests regulators may be comfortable with that outcome.
There are limits. Schmid is one voice on the Federal Reserve. His comments describe a direction, not a policy decision. FedNow reaches roughly half of demand deposit accounts, which is meaningful but not universal. And adoption by an institution does not mean its customers use the service heavily.
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