Kansas City Fed's Schmid Says FedNow Will Outpace Stablecoins for US Payments

Kansas City Fed President Jeff Schmid has argued that US instant payment systems, led by the Federal Reserve's FedNow service, will surpass stablecoins and blockchain platforms as the country's dominant payment technology. Schmid laid out his position at an event at the Hoover Institution and repeated it in interviews, framing FedNow as a stable, scalable evolution of the existing banking system rather than a replacement for it.

His core claim carries a large number: daily US payment flows are projected to run between $5 trillion and $10 trillion, all settling in real time. For banks, that volume changes the job description. Schmid said liquidity and duration management will become central to banking operations in the near future.

What did Schmid actually say about digital assets?

Schmid positioned real-time settlement as the default for US payments, not a premium feature. He singled out tokenized deposits as a technology that could redefine traditional banking operations. Tokenized deposits are ordinary bank deposits represented in digital token form — they keep the money inside the regulated banking system while borrowing the programmability that made crypto attractive in the first place. In Schmid's telling, they help make real-time settlement the norm rather than the exception.

The comments land in a regulatory environment that shifted after FedNow launched. The GENIUS Act of 2025 created a federal framework for payment stablecoins, giving dollar-pegged tokens clearer legal footing in the US. That framework was designed 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.

How big is FedNow today?

The adoption figures give Schmid's position some weight. FedNow launched in July 2023 to answer industry demand for real-time payments. The service handles instant credit-push transfers — the sender initiates the payment — and settles in central bank funds.

The numbers since then:

• 1,949 financial institutions were participating as of October 2026.
• Those banks and credit unions cover approximately half of US demand deposit accounts, the everyday checking accounts most people use.
• In Q3 2026, FedNow processed 6.38 million transactions valued at $370.9 billion.
• Record transaction volumes were reported by late 2026.

FedNow's reach is meaningful but not universal, and institutional participation does not automatically translate into heavy usage by bank customers.

What does this mean for banks and stablecoin issuers?

Tokenized deposits are the competitive wildcard. If banks can offer tokenized versions of insured deposits, they could absorb 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.

The operational shift is as significant as the competitive one. Real-time settlement of payment flows projected in the $5-to-$10-trillion daily range means treasury teams cannot rely on end-of-day netting to smooth out mismatches. Liquidity management becomes a continuous task rather than a daily reconciliation exercise.

There are limits to the argument. Schmid is one voice on the Federal Reserve, and his comments describe a direction of travel, not a policy decision. Still, with FedNow participation climbing toward full coverage of demand deposit accounts and the GENIUS Act framework now in force, issuers of payment stablecoins face a narrowing window to prove their rails can out-compete the Fed's own.