Fed’s Schmid says instant payments will outpace digital assets

A Federal Reserve official has picked a side in the payments race, and it isn’t the blockchain.

Kansas City Fed President Jeff Schmid has argued that US instant payment systems, led by the Fed’s own FedNow service, are positioned to surpass emerging digital asset payment technologies like stablecoins and blockchain platforms.

Schmid framed FedNow as a stable, scalable evolution of the existing banking system rather than a replacement for it.

What Schmid actually said

Schmid laid out his view at an event at the Hoover Institution and repeated it in interviews. His core argument is that real-time settlement is becoming the default for US payments, not a premium feature.

The stakes are large. Daily US payment flows are projected to fall between $5 to $10 trillion, all settling in real time.

For banks, that shift changes the job description. Schmid highlighted that liquidity and duration management will become central to banking operations in the near future.

Schmid also pointed to tokenized deposits as something that could redefine traditional banking operations. Tokenized deposits are essentially regular bank deposits represented in digital token form, keeping the money inside the regulated banking system while borrowing some of the programmability that made crypto interesting in the first place. In his telling, they help make real-time settlement the norm rather than the exception.

FedNow by the numbers

FedNow launched in July 2023, answering industry demand for real-time payments. It handles instant credit-push transfers, meaning the sender initiates the payment, and those transfers settle in central bank funds.

Adoption has climbed steadily. As of October 2026, 1,949 financial institutions were participating in the service. Those banks and credit unions cover approximately half of the country’s demand deposit accounts, the everyday checking accounts most people use.

Volume has followed. During Q3 2026, FedNow processed 6.38 million transactions valued at $370.9 billion. Record transaction volumes were reported by late 2026.

The stablecoin backdrop

Schmid’s comments land in a very different regulatory environment than the one FedNow launched into. The GENIUS Act of 2025 created a regulatory framework for payment stablecoins, giving dollar-pegged tokens a clearer legal footing in the US.

That framework was supposed to help stablecoins compete as a payments tool. Schmid’s argument suggests the Fed sees its own infrastructure as the more natural home for everyday money movement, regulated stablecoins or not.

What this means for crypto and the banks

Tokenized deposits are the wildcard. If banks can offer tokenized versions of insured deposits, they could absorb some of the programmability crypto users value while keeping funds inside the banking system. That would sharpen competition between bank-issued tokens and private stablecoins, and Schmid’s framing suggests regulators may be comfortable with that outcome.

For banks, the shift is operational as much as competitive. Real-time settlement of payment flows projected in the $5 to $10 trillion range daily means treasury teams can’t rely on end-of-day netting to smooth out mismatches. Liquidity management becomes a continuous task.

There are also limits to keep in mind. Schmid is one voice on the Federal Reserve, and his comments describe a direction of travel, not a policy decision. FedNow’s reach to roughly half of demand deposit accounts is meaningful, but it’s not universal, and adoption by individual institutions doesn’t automatically mean heavy usage by their customers.