Schmid Says Instant Payments Will Outpace Digital Assets

$5 trillion to $10 trillion in daily U.S. payment flows are projected to settle in real time, according to Federal Reserve official Schmid, who argued at a Hoover Institution event and in interviews that instant payment infrastructure is becoming the default rather than a premium feature.

His case rests on FedNow, the Federal Reserve’s instant-payment service. The system launched in July 2023 and supports credit-push transfers: the sender initiates the payment, and FedNow settles it in central bank funds. Banks and credit unions can therefore offer immediate settlement within the regulated financial system.

Adoption has climbed steadily. As of October 2026, 1,949 financial institutions participated in FedNow. Those banks and credit unions covered approximately half of the country’s demand deposit accounts, the everyday checking accounts most people use, putting the service within reach of roughly one in two such accounts.

Volume rose alongside that footprint. During Q3 2026, FedNow processed 6.38 million transactions valued at $370.9 billion. Record transaction volumes were reported by late 2026.

Schmid placed liquidity and duration management at the center of banking operations in the near future. For treasury teams, continuously settled payment flows leave less room for end-of-day netting as the mechanism for smoothing mismatches. Liquidity management, in his account, becomes a continuous operating task rather than an end-of-day adjustment.

Tokenized deposits form the larger strategic piece. Schmid described them as regular bank deposits represented in a digital token form. They keep money inside the regulated banking system while borrowing some of the programmability that made crypto attractive, and, in his telling, they can help make real-time settlement the norm rather than the exception.

The competitive backdrop changed after the GENIUS Act of 2025 created a regulatory framework for payment stablecoins, giving dollar-pegged tokens a clearer legal footing in the United States. The framework was intended to help stablecoins compete as payment tools. Schmid nevertheless presented Federal Reserve infrastructure as the more natural home for everyday money movement, whether or not private stablecoins remained regulated.

What does this change for banks and stablecoin issuers?

For banks, the shift is operational as much as competitive. Real-time settlement across projected daily flows of $5 trillion to $10 trillion means treasury teams cannot rely on end-of-day netting to smooth payment mismatches. If banks offer tokenized versions of insured deposits, they could absorb some demand for programmable money while keeping customer funds within the banking system.

For stablecoin issuers, the benchmark becomes more demanding. Bank-issued tokenized deposits could capture the programmability crypto users value while retaining a regulated deposit relationship, sharpening competition between bank tokens and private stablecoins. Schmid’s framing suggests regulators may be comfortable with that outcome; it also supports his view that Federal Reserve infrastructure is the more natural home for everyday money movement.

The case still describes a direction of travel, not a policy decision. Schmid represents one voice within the Federal Reserve, and FedNow’s reach across roughly half of demand deposit accounts is meaningful but not universal. Participation by an individual bank or credit union also does not demonstrate heavy usage by its customers.

It changes the practical benchmark for both sides from access to usage. Banks must show whether instant settlement improves treasury efficiency and whether tokenized deposits deliver programmability without pulling balances away from core products. Stablecoin issuers must compete with a Federal Reserve service already reaching roughly half of checking accounts, even as the GENIUS Act gives their dollar-pegged tokens a clearer legal footing.

The next market-structure test is whether participating institutions convert sign-ups into sustained customer volume and whether tokenized deposits keep regulated bank funding intact rather than cede that role to private stablecoins.