The Federal Reserve Board on April 7 unanimously approved a proposed amendment to Regulation J that would permit FedNow participants to use non-Reserve Bank intermediaries for cross-border payments. The amendment would extend to FedNow the same intermediary framework that Fedwire has used for decades. The proposal is now open for a 60-day public comment period.
Under current rules, both the originator and beneficiary of a FedNow payment must hold accounts at U.S. depository institutions with Federal Reserve master accounts. The proposed amendment would allow a U.S. bank to initiate a FedNow payment on behalf of a foreign correspondent bank's customer, with the correspondent acting as intermediary.
The change would position FedNow as a channel for real-time cross-border dollar settlement. Cross-border dollar flows currently rely primarily on Fedwire and CHIPS. No timeline has been set for when the final rule would take effect if adopted.