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This week, Circle submitted its response to the Federal Reserve Board\u2019s proposal to expand the service hours of its two large-value payments services: the Fedwire Funds Service (Fedwire) and the National Settlement Service (NSS). According to Circle<\/a>, the Fed\u2019s proposal presents a meaningful opportunity for U.S. financial regulators to revisit and upgrade the settlement architecture underpinning the U.S. financial system.<\/p>\n Many countries currently operate national payments systems on a 24x7x365 basis, demonstrating the ability to offer and support safe and reliable public and private fast-settlement systems, some with upwards of a decade of successful track record. Expansion of Fedwire hours to 22×7 would be a much-needed upgrade to the U.S. wholesale payments system. It also would offer incremental gains to the already thriving suite of 24×7 retail payment services that American consumers use daily. This, in turn, will help reduce some of the operational challenges associated with weekend and bank holiday-related settlement risks.<\/p>\n As noted in Circle\u2019s response, however, the expansion of service hours will not address some of the most significant challenges affecting everyday consumer payments. In fact, the expansion of services has the potential to exacerbate existing risks and transmission mechanisms from the banking to the payments sectors. As the 2023 U.S. banking crisis demonstrated, liquidity bottlenecks within the banking sector can have widespread and significant reverberations throughout the payments and fintech space. For this and other reasons, Circle has long advocated for regulators to more fully consider unbundling banking and payments.<\/p>\n Circle continues to urge the Fed to take a holistic view and ensure that efforts to modernize the wholesale settlement system address the most material risks before introducing potential new ones. In particular, the challenges affecting retail payments can only be solved through expanding access to the Fed\u2013 i.e., providing non-bank payments institutions access via a \u201cmaster account\u201d at the Fed. Extending Fed master accounts to non-bank payments firms is critical for modernizing payment infrastructure in the U.S. and addressing large liquidity demands on the banks while also enhancing the stability of well-regulated payment institutions. Importantly, commercial banks stand to benefit from reducing their role in payments as this would enable them to redeploy cash towards other forms of intermediation. For example, by freeing up payment-related reserves, banks can focus more on their lending activities that are vital to the American economy.<\/p>\n Payments innovations such as Circle\u2019s USDC operate on a 24x7x365 basis and have a proven track record as a safe and regulated form of always-on payments. Circle continues to encourage regulators as they seek to modernize the global financial architecture to take pragmatic and holistic steps \u2013 such as untangling payments from banking \u2013 to make the financial sector both more efficient and more resilient.<\/p>\nPotential Benefits and Challenges<\/h2>\n
Need for Broader Upgrades<\/h2>\n
Circle’s Advocacy for Modernization<\/h2>\n