The Federal Reserve Payment system used in settling transactions between financial institutions in the country suffered major disruption on Wednesday, Feb 24. The system, which executes $3 trillion worth of transactions each day, went offline for more than three hours due to an ‘operational error.’
The issue began around 11:15 AM ET when the network began suffering from outages. Though most of the key systems like settlement services were brought back online by 3 PM that day, officials admitted that several payment deadlines were affected. The Fed eventually extended the settlement deadlines so that financial institutions could clear off accumulated backlogs.
During the outage, the most affected systems were the FedACH, a clearinghouse that usually handles small transactions like utility bill payments and tax refunds. Fedwire, which handles large transfers between banks, was also affected. Last year, Fedwire dealt with 184 million transactions amounting to over $840 trillion. The National Settlement Service (NSS) was pushed offline as well.
The outage also affected cryptocurrency exchanges like Coinbase, Kraken, and Gemini. The activities in these exchanges were delayed. Gemini had to issue an alert to assure customers that their funds were secure.
The Federal Reserve President said, ‘it won’t happen again’
Federal Reserve Bank of Richmond President Thomas Barkin played down the payment system disruption, saying that it won’t happen again.
“It got fixed, and it’s back up and running… I don’t think this one is going to happen again, that we have figured out… These things do happen. Systems do click up and click down. I think we have addressed this one,” he told Bloomberg.
This isn’t the first time that the Fed’s payment systems have gone down. In April 2019, FedWire interbank funds transfer service went offline for three hours. Authorities blamed the disruption on “an internal technical issue” and refused to provide any further details.
Last December, transactions on the central bank’s automated clearing house system were delayed over the course of two days.
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