The Difference Between Wholesale And Retail CBDC

Not all CBDCs are the same.

For those who are unfamiliar with this, CBDC means Central Bank Digital Currency. This is sending shockwaves through the cryptocurrency community as many people believe governments will take over things via a CBDC.

To start, this viewpoint is problematic in that, for the major economies, the government and Central Bank are two distinct entities. Central banks such as the Fed are private entities. Even though they have some public ties, the stock in the Fed Reserve Banks are held by the private banks that operate in that region.

Another issue is distinguishing what the Central Bank is really after with regards to the CBDC.

Understanding the difference between politicians and bankers is vital to this discussion.

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Wholesale Operations

When it comes to banking, anytime you see the world "wholesale", this means at the banking level. It is a situation that does not involved the general public. In fact, all transactions are on the interbank level.

This is vital since many of the trials being run by Central Banks around the world are of this nature. Blockchain holds great interest to the bankers because of the properties. This could be a major boom to settlements, especially on an international scale.

We all know that sending money around the world is slow and expensive. The banks are well aware of this. Whereas the Fed is taking measures with FedNow, it is only a domestic payment system. Internationally we still see the same hodge podge of systems strung together.

Here is where CBDCs could come into the picture. By establishing this, banks would be able to settle within a matter of minutes anywhere in the world.

Notice how none of this has to do with the digital dollar or whatever [currency](https://leofinance.io/@leoglossary/leoglossary-currency0. This is simply bank-to-bank.

Retail CBDCs

This is the ones that people have to watch. Here we see the idea of control entering the situation.

Retail CBDCs are what have politicians drooling. It also is something that most bankers abhor. When you seem then talking negatively about CBDCs, this is exactly what they mean.

The idea of a digital USD to the banking system is laughable. It already exists. The commercial banking system creates digital dollars each time they write a loan. Here is why people like Governor Waller of the Fed claim that CBDC is a solution looking for a problem.

He is a banker. Power is not his concern since they already control the money supply. Giving a bunch of politicians control over monetary policy is not on the agenda of the bankers.

The Fed and BoJ

We see a lot of crap online about the implementation of CBDCs and how we are going to see them coming into being. As I stated in the past, this are going to be epic failures. Nevertheless, people seem to believe in the power of some type of ideology.

The reality is that both the Fed and Bank of Japan (Central Bank) have stopped pursuit of retail CBDCs. We do see the Fed still experimenting with wholesale CBDCs which is smart on their part. While it is unlikely they will implement anything of this nature with FedNow going live in 2023, it could help things internationally.

So what happens when the [Central Banks](https://leofinance.io/@leoglossary/leoglossary-central-bank0 of two of the top 3 economies say no to retail CBDCs? Basically, you can see how absurd the idea is.

Of course, this does not make the politicians happy. In fact, many in the US Congress are so antsy to get the power they are tasking Treasury with looking into a digital dollar through that department. Mark my words, this would turn into a real shitshow.

China

Many talk about the needing of a USD CBDC to keep up with the digital Yuan. After all, if China spread that currency throughout the world, it is a threat. That is laughable.

Right off the bat, we have to understand that, when it comes to control, the CCP is at the top of the list. The line between the Central Bank and government is dotted at best.

The digital Yuan is going to be a smashing success, within China. Outside of that country, it will be a miserable failure. The CCP can force the Chinese population to use it but that is all. It cannot make anyone outside that country accept it.

Who Has The Power

When it comes to the CBDC discussion, it is all about power. The banking system is the most powerful industry we have in the West. For this reason, they will not be obliterated by politicians who want more control. A retail CBDC would instantly crush the commercial banking system since a digital wallet would replace much of the need for a bank.

At the same time, as money is kept in these wallets, deposits would dry up within the banking system. This would constrain their balance sheets, reducing their ability to make money.

Do you think the bankers are going to allow this? Obviously not.

Thus, when you see someone talking about CBDCs, make sure they understand the difference between wholesale and retail.

They are two completely different things.

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