What is the role of the Federal Reserve in FedNow?

The Federal Reserve's role in FedNow is as the operator and regulator of the system. This means that the Federal Reserve is responsible for managing the infrastructure that supports the FedNow service, ensuring that it operates efficiently and securely, while also establishing rules and guidelines to govern how the service functions. As an operator, the Federal Reserve works to facilitate real-time payments among financial institutions, making instant transactions possible for consumers and businesses.

In addition to its operational responsibilities, the Federal Reserve also plays a regulatory role, overseeing the compliance of participating financial institutions with established standards and creating a framework for safe and effective payment processing. This dual function helps to promote trust and stability in the payments ecosystem, as financial institutions rely on the Federal Reserve to ensure proper functioning and adherence to regulatory requirements.

In contrast, the other options do not accurately define the role of the Federal Reserve in this context. While the Federal Reserve may advise financial institutions as part of its broader mission, its primary functions with respect to FedNow center around being both the operator of the service and the regulator that safeguards its integrity.