Last week, the Federal Reserve launched a new payment processing system dubbed "FedNow."

Officials say FedNow will allow individuals and businesses to initiate instant funds transfers between banks. Critics warn that FedNow could be a prelude to central bank digital currency (CBDC) that threatens financial privacy and freedom.

Fund transfers between banks made through FedNow will settle directly in accounts at the central bank. Once Fed accounts become widely adopted and used for payments, critics fear it's only one additional step to convert the "dollars" used in transactions into "FedCoin"—a proposed digital token to be issued directly by the central bank.

To be sure, similar arguments could be used to justify a CBDC as have been made with FedNow, e.g., it will improve the speed, efficiency and reliability of payments.

However, the FedNow system is really just a major upgrade to the highly deficient ACH payment system that has limped along for decades, with its very slow clearing time, lack of fraud prevention and other problems.