Fed's Payment System Goes Down, Bitcoin Fans Rush In

The Federal Reserve today reported that its internal services went down, leading Bitcoin supporters to take to Twitter to recite variations of the oft-repeated refrain: "Bitcoin never goes down." Ironically, however, a number of cryptocurrency exchanges also reported trouble getting money off their platforms due to the Fed outage. 

According to the Fed’s service status page, a number of the central bank’s services went down, including Fedwire and FedACH (Automated Clearing House), which allow for funds to move between banks and customers. Banks handle trillions of dollars in transactions every day through the Fed; the outage meant US banks were unable to send or receive wires, with the movement of possibly billions of dollars delayed.

Despite the outage, it isn’t clear how big the impact on banks and customers has been. 

 

“Our technical teams have determined that the cause is a Federal Reserve operational error,” the Fed said. “We will provide updates via service status as more information becomes available.”

As expected, crypto Twitter went into meltdown following the news, with many pointing out that the Bitcoin network (and Ethereum, Bitcoin Cash and many other blockchains, for that matter) was still up and running smoothly.

Does Bitcoin fix this?

Neeraj Agrawal of Washington think tank Coin Center said that Bitcoin "actually does fix this."

And there is some truth in what crypto proponents on Twitter pointed out. The Bitcoin payments network is decentralized and secure. Bitcoin is cryptographic, irreversible, distributed, and public—and therefore its network is very resilient against hacks or outages. 

“I always thought Bitcoin will end the Fed but they actually seem to be doing just fine on that by themselves,” coder Ben Kaufman tweeted. 

While Nic Carter, Bitcoin bull and founder of Castle Island Ventures, chimed in with: “Janet this seems inefficient”—cheekily referring to Treasury Secretary Janet Yellen, who earlier this week called Bitcoin "an extremely inefficient way of conducting transactions."

But despite the smugness on Twitter, the crypto world was struggling: exchanges, such as Binance, the world’s biggest cryptocurrency exchange, reported errors. With wire services down, those who want to move fiat currency from an exchange to their bank accounts can’t. 

“The Federal Reserve is down and this will impact all ACH and wire related activities on Binance US,” the exchange’s US branch said on Twitter. 

Still, decentralized exchanges (DEX), like Uniswap, had no problems; such protocols do not deal with wire transfers or fiat money at all but rather allow users to swap tokens that run on the Ethereum network on a peer-to-peer basis. DEXs still handle billions of dollars-worth of transactions daily. 

Bitcoiners were also quick to boast that Bitcoin’s network is far more secure than the Fed’s, too. Currently, thousands of miners around the world validate Bitcoin transactions via high-powered computing technology. 

“Fedwire has two back up facilities. One in New Jersey and one in Richmond,” wrote Coin Center’s director of research, Peter Van Valkenburgh. “Bitcoin has (checks notes) 10,195 backup facilities in over 100 countries across the world,” he added—referencing the Bitcoin miners around the world that validate transactions. 

It’s unclear right now if those wanting to make wire transfers will be made to wait again today, but one thing is certain: the Bitcoin network will keep chugging along.