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Emmanuel Daniel is a global thought leader in the future of finance. He is an entrepreneur, writer, and listed as a top 10 global influencer in the “Fintech Power50” list for 2021 and 2022!
Much of Emmanuel’s writing covers the future of finance, with a special focus on how cryptocurrencies, blockchain, gaming, and other technologies that are opening the doors to new transactional opportunities.
In this thought-provoking episode, Emmanuel delves into the implications of inflation and how it’s presenting a dualistic paradigm: an imminent risk but also newfound opportunities. As digital currency continues to gain prominence in our economy, he is optimistic on its trajectory as a potential asset class.
Emmanuel is an invaluable resource when it comes to uncovering key information about digital currency and understanding the trajectory of central banks. He provides deep insights on risks, important factors to consider, as well as top-tier asset classes that should be part of your portfolio.
Tap into the insights and valuable knowledge of Emmanuel Daniel in this unmissable episode! Get ready for an informative, entertaining journey that will leave you inspired.
In This Episode
- Emmanuel’s background and how his destiny changed.
- Where is the digital currency heading today?
- Emmanuel’s perspective about Central Bank Digital Currency.
- Emmanuel’s piece of advice to accelerating wealth trajectories.
Welcome to today’s show on Wealth Strategy Secrets. We have another great episode lined up for you. Today, we’re joined by Emmanuel Daniel, a global thought leader in the future of finance.
Emmanuel is an entrepreneur and writer, recognized as a top 10 global influencer in the Fintech Power 50 list for both 2021 and 2022. His writings primarily focus on the future of finance, with a special emphasis on how cryptocurrencies, blockchain, gaming, and other technologies are opening doors to new transactional opportunities.
His upcoming book, The Great Transition: The Personalization of Finance is Here, explores how the U.S. has shaped global financial innovations. Emmanuel is an avid traveler, having visited more than 100 countries, and he is currently working on his next book titled The Winning Civilization. Emmanuel, welcome to the show!
Thank you very much for having me on. I’m looking forward to this conversation.
Me too. I’ve been looking forward to our discussion. Having had the chance to read some of your materials and hear you speak, it’s truly thought-provoking. I appreciate your time today, and I know our audience is going to love it.
Let’s dive in. Before we jump into the wealth strategies you have to share, I want to touch on your incredible background. You travel a lot, which is a huge passion of mine as well. It brings such different insights, especially being in different countries and cultures and observing how they use money and operate financially. Can you tell us how this passion for finance started for you?
I trained to be a lawyer, but on the first day of my job, I realized this was exactly what I didn’t want to do. I spent about ten years in the wilderness. I spent a lot of time in management consulting, which gave me a front-row seat to help businesses adapt to changes in technology and capital raising. At some point, I felt this urge to start something of my own. I don’t come from a family of business owners, but I knew I had to let this beast out.
In 1996, I started a very simple business called The Asian Banker. It began as a magazine, primarily because it gave me the right to sit in front of CEOs of banks across the Asia Pacific region. From 1996 onwards, I witnessed firsthand how Asia has been at the forefront of wealth creation. We’ve seen economies grow at rates of 6% to 12% a year in some cases, unabated for many years.
This experience has given me an amazing opportunity to see how wealth is created and absorbed into society, and how it has changed entire countries. Leading the way in this transformation has been China. I started an office in Beijing in 2000, giving me a front-row seat to observe a country that joined the WTO and kept growing year after year. Initially, growth was around 12% annually, but it has since slowed to 10%, 8%, and now around 5%.
There are many issues facing China today, and while I understand the country very well, it’s important to recognize what it has done right within this context. Spending a lot of time between Beijing, Singapore—where I’m from—and New York has allowed me to juxtapose these changes and identify the similarities and differences among these three very dynamic regions of the world.
In 2022, I spent more than six months in the U.S. launching my first book, The Great Transition. During that time, I began to form opinions about what makes the U.S. different from the rest of the world. The country has two key advantages: first, the freedom of information, which treats information as an asset; and second, the ruthlessness of capital. This ruthless use of capital is something that the rest of the world doesn’t fully appreciate about the U.S.
However, the downside to this approach is that corporate innovations often commoditize everyday life due to the relentless pursuit of profitability. As a result, large businesses are sometimes viewed negatively in the U.S. because they tend to commoditize many aspects of daily life—everything from flying to hotels to education.
On the other hand, we see China, which operates in a highly curated environment but within a sort of bubble. They’ve used this enclosed period effectively to create a scale for various innovations, especially given their lower starting point. They have built a lot of infrastructure, but every society must eventually seek validation from the ground up. This is where China is starting to struggle; it lacks the social institutions necessary for that grassroots validation.
Both the U.S. and China have their strengths and weaknesses. Overall, the U.S. still leads in innovation and societal accountability. While the accountability mechanisms may be broken, they still exist. This is reflected in the significant public involvement aimed at correcting political issues.
Whenever the U.S. enters election mode, the message from the populace is clear: we want change, accountability, and a more inclusive society. Unfortunately, the political response has not aligned well with these desires.
These are just some thoughts I have regarding wealth creation. Wealth is created, distributed, and enjoyed by society as a whole. It’s one thing to have a country filled with wealthy individuals, but quite another for people to feel rich and enjoy the comforts that come with wealth—like being able to go out to a bar or coffee shop in a safe environment.
Both the U.S. and China have these environments, but many developing countries lack that sense of safety and curation. So, I just wanted to throw these ideas out there.
Just fascinating, Emmanuel. I love your perspective because most of us are constantly inundated with media, each with its agenda trying to shape a particular narrative. Having this global perspective, this 30,000-foot view is thought-provoking.
Given the timing of our discussion—recorded in January 2023—I think it’s relevant to dive into our recent investor survey, where we aim to identify the top dangers or risks that investors are currently facing. I’m intrigued to hear your thoughts on fiat currencies, particularly about inflation. Will we see a central bank digital currency emerge? Is gold going to rise again? Where do you see money moving forward?
The book I just published, The Great Transition: The Personalization of Finances, discusses how the institutions of finance are being disintermediated. Individuals are gaining greater control over asset ownership and how they transact with each other, whether in payments, finance, or wealth creation. That’s a simplified view.
Regarding fiat currency, I can draw from my recent travels. In the past six months, I’ve visited nearly 20 countries, spending significant time in the Caribbean, the U.S., at least four countries in Europe, several in Africa, and recently in Malaysia and Singapore.
I’m shocked by the rampant inflation worldwide. It’s alarming, especially in developing countries where we see rising food prices. I often wonder how, with stagnant incomes and wages, basic food costs have increased so dramatically, particularly in nations that rely on imported food. These countries are effectively importing inflation.
When we analyze the source of this inflation, much of it traces back to the U.S. Federal Reserve, which, while often described as “printing money,” is creating substantial liquidity that they are now trying to retract.
The first point to emphasize is that inflation has become a dangerous global phenomenon. This, in turn, breeds distrust in the state and central banks and their ability to control inflation and excess liquidity in the marketplace. However, this situation also creates significant opportunities for new asset classes to emerge.
Already today, Cryptocurrencies, especially Bitcoin and Ethereum, are considered asset classes alongside gold and property, able to absorb this excess liquidity. I think that if this period of inflation continues, society will be looking for alternative asset classes to manage this liquidity. As a result, we might see some irrational investments in alternative assets or quirky options. For example, NFTs represent an interesting phenomenon where valuations are assigned to assets that otherwise might not have any value. This, in turn, triggers the evolution of technology and helps us understand where we are headed.
There’s a knock-on effect from liquidity to inflation to asset creation. This is enhancing the network world we are entering. Since many of the new assets being created are digital, the ability to interact, buy and sell, and share exists on digital platforms. When we think of NFTs, for example, everything exists within this networked world, which has a new set of rules that differ significantly from the market world we currently inhabit.
In the second-to-last chapter of my book, I borrow an idea from a RAND Corporation thought leader named David Ronfeld. He proposed in the 1990s that society transitions through various stages: starting from tribal, then moving to institutional, market-centric, and finally to a network-centric model. It’s impressive that he formulated this paradigm back in the 1990s, considering the most advanced technology at the time was the fax machine. Today, as we witness new technologies heralding the onset of the network economy, it’s remarkable that he was able to foresee this.
Cryptocurrencies such as Ethereum and Bitcoin are asset classes alongside gold.
I tested his idea, examining new asset classes like Bitcoin and cryptocurrencies. When we consider the opinions of Warren Buffett and Charlie Munger on how we should approach cryptocurrencies, it’s clear they view them through the lens of the current market economy. Everything they say about the market economy holds regarding how we value assets, whether they have underlying value, or if they generate real income.
We need to assess even the new asset classes being generated within the rules they are familiar with. However, according to David Ronfeld’s transitions, there are new rules being established in the network economy that the Warren Buffetts of the world might not yet comprehend.
The first element of the rules in the network world is the concept of identity. How do you and I validate each other? In the market world, identity is validated by institutions that confirm your existence through their platforms; you need an account with them, and so on. In the network world, you and I validate each other’s existence through networking with other nodes that recognize us. Bitcoin and Ethereum operate on these mechanics, validating participants through a network effect.
Then come the operating principles of the network effect, such as non-remediation and information-supporting elements like credit profiles, which establish the rules in this new framework. Another interesting point in my book, which isn’t just a 30,000-foot view but a street-level examination, is how the banking industry has evolved since the end of the Bretton Woods era in 1971 when the U.S. abandoned the Bretton Woods system and allowed the dollar to float.
The banking industry has undergone significant changes since the end of Bretton Woods. Back then, if you looked at a bank’s balance sheet, it consisted primarily of real mortgages. By 1984, during the first banking crisis, known as the savings and loans crisis or the mom-and-pop banks crisis, the assets on the books were still hardcore mortgages. However, banks struggled to match their assets and liabilities because liabilities began emerging through markets where the dollar’s value was no longer tied to gold but was determined by market forces.
Over time, this journey took the banking industry through a series of crises, including a market crisis and a derivatives crisis. Increasingly, these derivatives were no longer supported by any underlying assets.
We are becoming increasingly ephemeral in the asset classes that define the banking industry and sit on banks’ balance sheets. Banks have begun to hive off mortgages from their books, selling them off and then taking on more mortgages, which has made them more dependent on fee-based revenue. Just as the banking industry has become increasingly ephemeral in its balance sheet, many businesses and individuals are following suit. This means that the things we value today are no longer hard assets.
Even hard assets are evolving in the network world. A mortgage, for instance, need not be a 30-year loan on a fixed property; it could be a lease a shared asset, or even an asset that exists solely in the digital realm. In other words, it might not even have a physical form.
We are in a transition where the concept of asset and wealth is shifting from hardcore assets to something we perceive to have value. When we examine NFTs, for instance, the prices people are willing to pay in the NFT market align with the transitions taking place today. Furthermore, by the time Generation Z fully comes into their own, their perception of assets will be markedly different from that of the baby boomers.
Now, let’s discuss Cryptocurrencies, particularly Bitcoin and Ethereum, the two leading players in the space. Where do you see them heading in the next 5 to 10 years? Cryptocurrencies, functioning within the market economy, will be subject to the same rules as other assets in that economy.
Their value will rise and fall based on supply and demand, as well as the number of players in the marketplace. Gold, for example, is a fully developed asset class, with institutions, central banks, and individuals investing in it for various reasons, from jewelry to gold bars.
Cryptocurrencies will undergo similar phases. Just two years ago, U.S. institutions and corporations began including cryptocurrencies as part of their treasury assets, effectively creating a new investor class. Just last December, the Bank for International Settlements (BIS) released a paper stating that by 2025, central banks worldwide could start including cryptocurrencies and stablecoins as assets on their balance sheets.
The BIS recommends that no more than 2% of a central bank’s balance sheet should be invested in cryptocurrencies, which amounts to approximately $3.5 trillion in potential worldwide central bank involvement in cryptocurrencies.
Despite all the noise surrounding the scandals in cryptocurrencies today, the investor community is becoming deeper, broader, and much more sophisticated. I know many detractors argue that cryptocurrencies are bad or simply distractions with no inherent value. However, once any phenomenon emerges, like a magic box opening, it cannot be put back in. It is here to stay and will be part of human civilization for the foreseeable future. The specifics of how it will play out will become evident as time goes on.
Now, the interesting thing about Bitcoin is that, although it lacks utility on its own, it serves as a necessary token to interact with and exchange value across a range of applications in the network world. Supporting cryptocurrencies like Solana and Tezos enable, or even require, the use of Bitcoin as a token of value for transactions. Therefore, it’s not that Bitcoin lacks utility; rather, its utility is still being developed and shaped. The rules governing Bitcoin’s existence in the network world have yet to be fully established, especially in these formative years.
In my assessment, as I mentioned in my book, there’s no reason why Bitcoin, once it becomes fully functional in a utility sense, would lose all the value generated today as it becomes commonplace. A significant portion of the value seen in cryptocurrencies today exists for two reasons: first, there are whales in the equation who hoard large amounts of crypto and dominate the market; second, the economics of crypto suggest that it’s only valuable if its price goes up. However, in the network world, its value will depend on its utility.
When we make that transition, we will witness a completely different game being played. Even if the prices of cryptocurrencies drop, they will still serve as the tokens of transaction or the language of the network world.
How far into the future do you see this? Are we talking about a couple of years, or is it more than five years away?
I think we are already there. The early days of the network world are already in existence. We can point to it, and people are operating within it. The main reason we don’t see it more clearly is that many of the applications and utilities in the network world are still very technology-centric, primarily understood by geeks. For example, decentralized finance (DeFi) requires a bit of programming knowledge just to transact, buy crypto, lend it, and stake it. The technological aspects can be daunting for the average person.
In the realm of decentralized finance, the biggest players are indeed tech-savvy individuals. When I engage with these systems, I often spend time trying to understand concepts like staking. As these processes become easier to comprehend, we will see broader adoption. The beauty of crypto is that for every cryptocurrency, like Solana, 300,000 programmers are working worldwide to create applications and make them more user-friendly. All of this development happens on open-source platforms.
This level of energy directed towards cryptocurrencies, particularly specific ones, is unprecedented compared to how institutions deploy technology. The largest institutions may have 10,000 in-house programmers, often working on legacy systems. In contrast, the future of crypto is being shaped by hundreds of thousands of freelancers working on the frontier voluntarily. This immense energy in the network world cannot be underestimated.
The early days of technology are still relevant today. However, there are governance issues and bad actors that emerge with any new technology. Historically, whenever a new technology has been introduced over the past 2,000 years, bad actors have always found a way to exploit it. For instance, when the Gutenberg printing press was invented in the 1450s, its two major applications were printing Bibles and producing pornography, along with political pamphlets.
This pattern of initial disruption and innovation often involves bad actors. We are seeing similar trends in the current crypto landscape. Many of the issues in the crypto and network space stem from governance, not the technology itself. The technology provides transparency; it allows for tracking and accountability. It reassures us that these bad actors can be identified and stopped.
Now, the big question is: what factors determine the direction and timeline of technology? One significant driver is the incumbents, whether they are large businesses or regulators who implement regulations that can slow down the development of innovations in order to protect existing users. In my book, I mention historical photographs from the time when motor vehicles were first introduced. Henry Ford popularized the motor vehicle around 1902 or 1903. In those photographs, you can see hundreds of horse-drawn carriages and just one motorized vehicle.
Initially, rules were created for motorized vehicles because they were noisy, heavy, damaged roads, and frightened horses. As motor vehicles became quieter, faster, and more comfortable, those rules became less applicable. By the 1920s, there were far more motorized vehicles than horse-drawn carriages in New York, and the regulations had evolved accordingly. We will likely see a similar transition in the crypto space: the current rules focus on innovations in crypto, but as they become commonplace, these rules will evolve.
When I speak to bankers, I ask them to imagine a time when their most important product is no longer the bank deposit. Many find it hard to envision this. I challenge them to consider a future where every bank issues its stablecoin and competes to make their stablecoins the preferred currency in the network world. They often struggle to see this transition.
However, that shift has already begun. Banks pay very little for deposit accounts, yet they have excess deposits that they trade on their books for profit without passing on those benefits to depositors. At the same time, digital wallets have become as powerful as deposits. In many countries—though not as evident in the U.S.—ride-hailing companies have developed digital wallets that people prefer to bank deposits.
These companies connect users to various lifestyle needs, such as restaurants and daily payments. This trend is particularly noticeable in China, Southeast Asia, India, and parts of Africa. In Africa, payments have become simplified to the extent that transactions are merely information exchanged between two devices. With this system, there’s no need for a traditional bank; your mobile phone functions as a bank, allowing you to pay each other directly.
When I promote this idea to my American friends, they often reject it. “No, we are happy with our credit card system.” Without realizing that in a credit card system, there are easily five to six beneficiaries at the backend who participate in the processing and also need to be paid. This means that the cost of a transaction is very high, and many people in the payments industry do not realize how expensive a credit card transaction is. In contrast, Africans have managed to reduce this cost to almost nothing.
Digital wallets are growing rapidly. I have numbers in my book that illustrate how quickly this growth is occurring, reaching into the hundreds of billions of dollars, and they are now standing alongside bank deposits. The next iteration involves cryptocurrencies or stablecoins functioning as digital wallets in the network space. That transition is well underway.
The speed of this transition will depend on how quickly utilities in the network space are created, which we will need to rely on for everything from gaming to education to healthcare. The value of operating in the network space can help us generate much more value for ourselves. For example, in healthcare, having data on how many other people suffer from the same symptoms can help you form a more informed view and discuss potential remedies. This is just a simple example, but there is a whole range of utilities that exist—or could exist—in the network world that will accelerate this process. I would estimate it could take as short as five years and as long as ten years for some of these realities to materialize.
Emmanuel, what are your thoughts on central bank digital currencies? I might be one of the few people in the world saying this, but I do so with full conviction because I have met with several central bank governors from countries that have implemented central bank digital currencies. I believe they are a distraction that will eventually fade away in favor of some form of stablecoin alternative.
I am familiar with people at the Bank for International Settlements and several central bank governors, and I was surprised by the level of faith that central bankers, including those from the U.S. and Canada, have in central bank digital currencies as a necessary functioning model. There are several reasons why I believe central bank digital currencies will fail. Firstly, they will not be able to keep up with the speed and intensity of innovations taking place in the crypto and stablecoin markets. They simply cannot compete.
For example, China and a few European countries with central bank digital currency models are spending more time trying to keep up with new rules regarding cryptocurrencies as they emerge, rather than innovating. Whenever a central bank’s digital currency announces an innovation, they are essentially just catching up to something that has already happened in the crypto space.
Secondly, many central bankers seem to underestimate the level of distrust society has towards them. There is no way that a central bank digital currency could be implemented in Canada after the trucker protests two years ago, especially considering how the government was able to switch off the bank accounts of the protesters. If the state can do that in a traditional banking environment, society will be very reluctant to allow that in a central bank digital currency scenario.
The distrust of the state is deeply entrenched. When Janet Yellen, who was previously a central bank governor and is now the treasury secretary, promotes the idea of central bank digital currencies, I wonder if she understands the public sentiment. Does she think it’s feasible to introduce a CBDC under these circumstances?
Additionally, as I mentioned earlier, the BIS has put out a paper stating that they are creating the infrastructure for central banks to accumulate cryptocurrencies on their balance sheets starting in 2025.
To me, this seems like a step backward for central banks. Essentially, if central bank digital currencies don’t work, they should invest in alternatives to avoid losing momentum. I think the best bet for central banks is to allow the energy being released in cryptocurrencies and stablecoins to guide them in the right direction. If you look at the BIS paper, they’ve already identified key areas to focus on regarding stablecoins, such as the balance sheet, governance structure, and algorithms. If a stablecoin is driven by an algorithm rather than a balance sheet, there is a discount mechanism in place, among other factors. They understand what’s happening in the crypto and stablecoin space. They’re not naive; they get it.
It’s such an interesting debate, and that’s a great perspective. Emmanuel, if you could give our listeners just one piece of advice about how they could accelerate their wealth trajectory, what would it be?
The single biggest challenge in accelerating wealth trajectories today is combating inflation and its impact on assets. When you accumulate cash, it’s clear that in three years, $1,000 won’t have the same value. If you invest that cash in a property, the property’s utility will determine its value.
In a prime city, property values tend to rise with market trends. Although the value of money is being significantly diminished, property is an asset class that generally holds its value because everyone needs a place to live. Other asset classes also play a role in absorbing inflation.
From my travels, I’ve observed that some countries are better at protecting their economies from inflation than others. Overall, the U.S. ecosystem has almost zero protection against inflation. However, it also has a diverse array of asset classes that serve as alternatives. For example, securities can act as an inflation hedge. When we see securities valued at 70x or 80x, it often has little to do with the underlying assets or the business’s income generation; rather, it’s functioning as an inflation absorber.
The only drawback of the U.S. securities market is that it has brutal correction mechanisms. Every five to ten years, there’s a correction. If you’re riding the market when it’s up, you can survive the corrections. However, if you enter the market at a high point, you could face significant challenges. The idea of buying low and selling high remains a sensible strategy.
Additionally, I firmly believe that cryptocurrencies have emerged as a new asset class capable of absorbing inflation effectively. This is not only because they serve as a store of value, but also because the investor community for crypto is expanding. As more people enter the market, the influence of large investors, or “whales,” is diluted, making it more stable over time. It’s still early days for this asset class, so now is the time to invest and ride the wave.
Ultimately, the effectiveness of this approach can depend on the country you reside in. Some countries excel at attracting foreign investment, creating infrastructure, and ensuring job growth and competitive wages. Those countries are likely to thrive and become wealthier.
Some countries are not very good at attracting investment, which leads to negative consequences for their populations. So, where you are is as important as what you’re invested in. That’s sage advice. I appreciate that.
Unfortunately, our time has come to an end, Emmanuel. I could see us continuing this conversation for a long time; you’ve made some excellent points. I truly appreciate you coming on today to share your insights. How can folks read your book, or if they want to learn more about you and follow your work, what’s the best way to do that?
The easiest way is to remember my name, Emmanuel Daniel. My blog page, EmmanuelDaniel.com, is a great starting point because my book is featured there. Even after writing the book—especially after writing it—I’m making several important assertions that I’m continually learning about. You’ll find those on my blog.
For instance, in discussing wealth creation, I assert that regulators owe it to disadvantaged populations to provide digital access so they can generate their wealth. In some countries, cryptocurrency investments are only permitted for high-net-worth individuals, which I believe is unjust.
By restricting ordinary people from investing in any asset class, we effectively deny them the opportunity to leverage inflation and benefit from new asset classes that even regulators may not fully understand. These are some of the assertions I’m making on my blog. I welcome feedback from anyone, even those who disagree with me, as it helps me refine my ideas further.
I look forward to checking that out. We’ll include your website in the show notes—EmmanuelDaniel.com—and provide all the relevant links for our listeners to check out. Emmanuel, thank you once again. I’m grateful for the opportunity to connect today.
Thanks, Dave, for the opportunity and the engaging conversation.