Educational Newsletter - Volume 1, Issue 1

United States of America FinTech R&D Program

Educational Newsletter - Volume 1, Issue 1

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Dear readers,

Welcome to the first issue of our educational newsletter. In this issue, we will dive deeper into the definitions and meanings of two important concepts in the realm of financial technology: the FedNow Service and U.S. Digital Legal Tender. Let’s clear up how we see this all because we can see how you see it today. We get it, we understand, but are we to be naive that we are confident in a “Middle Ground”. The purpose of our R&D program is to at least try everything once. Something has to be successful for everyone in our exploration into the FinTech Sciences. In this letter, we will give our view on what FedNow and U.S. Digital Tender are, and their differences. -U.S. FinTech Engineer #0

FedNow Service: ACH-like Rail in the Form of USD Legal Tender

The FedNow Service is a new real-time payment and settlement service provided by the Federal Reserve. It aims to offer an ACH (Automated Clearing House)-like rail in the form of USD legal tender, ensuring faster and more secure transactions compared to traditional methods. The funds transferred via the FedNow Service are considered legal tender and are covered under the FDIC (Federal Deposit Insurance Corporation) insurance, up to $250,000 per depositor.

For example, if a bank such as SVB (Silicon Valley Bank) or Signature Bank were to experience losses beyond the insured amount, the FDIC insurance would cover the loss up to $250,000 per depositor. It is important to note that the FedNow Service, while offering faster and more efficient transactions, is still subject to the FDIC insurance limit.

U.S. Digital Legal Tender: A New Monetary Instrument

The U.S. Digital Legal Tender (GUSD and FEDC), also known as the Central Bank Digital Currency (CBDC), is a digital bond-level product that can be sold directly to consumers via Treasury Direct at $1 per token. This new monetary instrument offers a unique monetization opportunity for banks, which can purchase the digital tokens for $0.95 and resell them on the secondary economic market for $1. The profit from this transaction, $0.05 per token, is then split between the bank and the Federal Reserve at a 60/40 ratio. [Addendum add: consumers will be able to capitalize on P2P buy and sell swaps for USD for a minimum of $0.025 or more depending on the supply and demand factor at the time of swap.]

This new instrument is backed by a USD-filled Master Account and can be redeemed back to the Federal Reserve at a 1:1 ratio for the Master Account USD (for member banks). One of the main reasons consumers may be drawn to this product is that it is not subject to the FDIC insurance limit. If banks like SVB and Signature were to offer a secondary service for U.S. Digital Legal Tender, the holdings would be covered by the backing USD in the pooled Master Account.

In conclusion:

The FedNow Service represents an improved ACH-like rail that offers faster, more secure transactions while still being subject to the FDIC insurance limit. On the other hand, the U.S. Digital Legal Tender is a groundbreaking FinTech product that provides built-in monetization for stakeholders. By offering a digital monetary instrument not subject to the FDIC limit, it enables a new level of financial flexibility for consumers, while also generating revenue for banks and the Federal Reserve.

As the world of financial technology continues to evolve, it is crucial to stay informed and understand the nuances of these new services and instruments. We hope this issue has provided valuable insights into the FedNow Service and U.S. Digital Legal Tender, and we look forward to exploring more topics in future issues.

Sincerely,

The United States of America FinTech R&D Program Team

*(We gave ChatGPT 4 only this, try it for yourself at https://chat.openai.com/ and remix and post your own version for school. You’ll get an A+ using this to flesh out “Thesis” - You can tell the teachers you came up with it, don’t worry, we’re cool!):

Write a 2 page Educational Newsletter from the United States of America FinTech R&D Program in deeper analysis of the definitions and meanings of the following: FedNow Service = ACH-like rail in the form of USD Legal Tender as used today, covered under FDIC $250,000 insurance (e.g., SVB, Signature liability of lose above). U.S. Digital Legal Tender (e.g., CBDC) = is a digital bond level product that can be sold directto-consumer at Treasury Direct at $1 per token, opens a new monetization option to banks to buy for 0.95 and resell on the secondary economic market for $1, splitting the 0.05 profit with a 60/40 with the Fed. This new instrument is back by a USD filled Master Account and can be redeemed back to the Fed 1:1 for the Master Account USD (to member banks). The main reason why the consumers will want this product is because this asset is not subject to the FDIC limit. If SVB and Signature operated a secondary service for U.S. Digital Legal Tender, the holdings would have been covered by the backing USD in the pooled Master Account. In closing: FedNow Service is an improved ACH-like rail subject to the FDIC limit; U.S. Digital Legal Tender is a pure FinTech product with a built in monetization for stakeholders where simply: everyone makes money, and there's no FDIC insurance as each licensed distribution is backed 1:1 by a USD Master Account, or a physical cash printed reserve thereof.