A Federal Reserve official has picked a side in the US payments race, and it is not the blockchain.

Jeff Schmid, president of the Federal Reserve Bank of Kansas City, has argued that instant payment systems led by the Fed's own FedNow service are positioned to surpass emerging digital asset payment technologies such as stablecoins and blockchain platforms. In his view, FedNow represents a stable, scalable evolution of the existing banking system rather than a replacement for it.

What Schmid Said

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

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

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

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

FedNow by the Numbers

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

FedNow is not the only instant-payment rail in the US, either. The Clearing House's RTP network, operated by a consortium of major commercial banks, has offered real-time payments since 2017, so the race Schmid describes spans the entire instant-payments ecosystem, not just a single Fed service versus crypto.

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

Volume has followed adoption. During the third quarter of 2026, FedNow processed 6.38 million transactions valued at $370.9 billion, and record transaction volumes were reported by late 2026.

The Stablecoin Backdrop

Schmid's comments arrive in a very different regulatory environment than the one FedNow launched into. The GENIUS Act of 2025 established a regulatory framework for payment stablecoins, giving dollar-pegged tokens a clearer legal footing in the United States.

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

Implications for Crypto and Banks

Tokenized deposits are the wildcard. If banks can offer tokenized versions of insured deposits, they could absorb some of the programmability that 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 trillion to $10 trillion daily range means treasury teams can no longer rely on end-of-day netting to smooth out mismatches, and liquidity management becomes a continuous task.

There are limits to keep in mind. Schmid is one voice on the Federal Reserve, and his comments describe a direction of travel rather than a policy decision. FedNow's reach to roughly half of demand deposit accounts is meaningful but not universal, and adoption by individual institutions does not automatically translate into heavy usage by their customers. The indicators worth tracking from here are concrete ones: FedNow's participation count and quarterly transaction figures, and whether tokenized deposit discussion matures into live offerings from banks.