In this episode of "Money Talk With Tiff," Tiffany Grant sits down with financial futurist Emanuel Daniel to demystify the complex world of cryptocurrency, Central Bank Digital Currencies (CBDCs), and the FedNow program. Emanuel provides insightful explanations on the evolution of digital finance, how cryptocurrencies like Bitcoin work, and the prospective impacts of governmental digital currencies.

Tiffany and Emanuel also discuss the importance of digital payment systems and the future landscape of finance. Whether you're a seasoned investor or a curious novice, this episode will equip you with a deeper understanding of these transformative financial technologies.

Check out the full show notes: https://moneytalkwitht.com/podcast-show-notes/understanding-fednow/

Takeaways

• Cryptocurrency began with Bitcoin, created by Satoshi Nakamoto, and has evolved significantly since.
• The concept of decentralized finance (DeFi) allows people to lend and transact without intermediaries.
• Central Bank Digital Currencies (CBDCs) are government-issued digital tokens that raise privacy concerns.
• FedNow enables instant digital payments, improving convenience for transactions in the U.S.
• Cryptocurrency's value is tied to its utility, not just its speculative price.
• The future of finance may involve more direct transactions between individuals without banks.

Resources Mentioned

• Book: "The Great Transition: The Personalization of Finance is Here" by Emanuel Daniel
• Get $50 from Coinbase

Connect with Emanuel Daniel

• Blog: emmanueldaniel.com
• Twitter: @EmmanuelDaniel
• Instagram: @edanielmoments
• Facebook: Emmanuel Daniel Asian Banker

Connect with Tiffany Grant

• Website: moneytalkwitht.com
• Instagram: @moneytalkwitht
• Facebook: Money Talk With Tiff
• Twitter: @moneytalkwitht

Thank you for joining us for this enlightening discussion on digital finance! Don't forget to tune in next Thursday for another episode of "Money Talk With Tiff." Until then, keep spending wise and living financially savvy!

Support this Podcast

Copyright 2024 Tiffany Grant

You know what it is. That's right. It's time to talk money with your money nerd and financial coach. Now tighten those purse strings and open those ears.

It's the Money Talk with Tiff podcast.

Hey, everyone. I am so excited because I have Emmanuel Daniel on the line. Now, Emmanuel is a financial futurist, so you're probably like, what does that mean?

Well, he's here to talk to us about cryptocurrency bed now, which I know has been a hot button topic, and CBDCs, which we'll get into what that means here in a few. But, hey, Emmanuel, how are you?

Tiffany? Good to be on your show and, you know, can't wait to get down to the points that you just raised.

Yes, yes. This is going to be a very informational, not just for the audience, but for me episode. So I'm super excited to get started here.

So first and foremost, let's lay a base down for my audience. If people are not familiar with cryptocurrency by now, what is cryptocurrency and how does it work?

You know, the one question that people ask about cryptocurrency is that, is that the new gold? Is it a digital version of gold? Is that something that I need to save and I need to put into my portfolio so that I can become rich later in life?

Or, you know, and all those things that they talk about cryptocurrencies, that the price will go up and therefore I must hold crypto. Is that what I should do? And what's this thing called digital finance or defi?

The thing is that cryptocurrency, it came into being with this thing called bitcoin.

And bitcoin was created by an anonymous guy who gave himself an interesting name, Satoshi Nakamoto, and he created a crypto, an algorithm that essentially couldn't be broken and hasn't been broken up to this day. And therefore, it is sometimes called a digital gold, meaning that it's like gold cannot be broken into its constituents.

It doesn't mix with other elements easily and so on. I mean, it does if you can oxidize gold, but when you purify it, you know, its users are limited.

And the value of gold is guaranteed by the fact that there's a limited quantity of it and it cannot be distorted. And so if you use that definition, yeah, you know, cryptocurrency, the original cryptocurrency, bitcoin, is exactly that. It hasn't been cracked into.

And therefore millions of people around the world are trying to get their hand on it and the way in which it is mined.

Just like physical gold is mined in the gold mines of Africa and some faraway places, it's mined in the digital space and using an algorithm in order to be able to capture bitcoin. But then what also happened was that the technology used to create bitcoins has been used to create all kinds of cryptocurrencies.

So the magic of cryptocurrencies, and here's where your audience needs to hang in there. Because every one of us can create our own cryptocurrency. How's that? You can, I can, your uncle can.

And it's only a matter of when we create it, Will the people that we want to pay to, will they accept the value that we give to it? Cryptocurrency has become a very all encompassing term with any number of cryptos out there.

And what some of the creators of crypto have done is they've created applications on them, things that you can do with them.

You can transact between cryptos, you can carry a certain application, like create the ability to carry a bond or a piece of information, stuff like that. So there's a lot of things that you can do. Then you ask, what's all this? Why do I need to care?

So the original bitcoin, that's gold, that's like it's worth just getting your hand on a little bit of it, hanging on to it and seeing how that does with the rest of your portfolio. But the rest of the cryptos, they're only as good as they are useful.

So if you're in that space, there are lots of things that you'll be doing, including something called decentralized finance, which is lending it on platforms to other people and so on. If you want to go deeper that way, you can expect experiment a little bit. And you need to do that because we are all moving into the digital space.

You know, there are lots of things.

Now when you think about money and you think about what Apple has just introduced, which is, you know, the Apple Vision Pro, which is a virtual reality augmented reality goggle, right?

And you think we have nothing to do with each other, in a way they have, because the world that we're going to be living in, or rather we already in, there is one where we can switch between real life and virtual life and augmented life. Augmented, meaning that real and virtual coexisting. In other words, I can be talking to you right now, I can be talking to someone else as well.

In an augmented reality and feel as if that person is right there with me, just like you are.

So for all these new things, the new ways of living that is coming about, we need this digital currency, this digital token by which we can pay each other, transact with each other, exchange things of value to each other, and stuff like that. So I want to keep it very simple. I'm saying that we are all moving into the digital world.

Things that used to exist in the physical world, like physical gold, needs that digital version of it. And therefore we need to start thinking a lot about it. Now then the question is, will bitcoin go up to a million dollars and stuff like that?

Now, that's a whole different ballgame because the price fluctuates. Because in the early days of Bitcoin, only six investors held more than 50% of the Bitcoin in circulation. But that's now breaking down.

More and more people are beginning to own a little bit of bitcoin.

And as that process continues, the price of bitcoin will fluctuate a lot until it finds a stable price where it becomes more people collect Bitcoin in order to be able to actually use it. Right now, lots of people are just collecting it to hold. They call it odal or hold it, in the hope that the price will go up.

I'd say that if you have a portfolio of investments, everything from cash to securities to mortgage and stuff, add this as one little bit so that you. You sort of get a bigger picture of the investment opportunities that are. That are going to be created in the future.

Yes, yes. And you know, you have explained crypto so well.

Just now I'm just, you know, thinking about what I can equate to it, you know, that I use on a regular basis. And it reminds me of video games. Right. So for instance, Fortnite, they have the V Bucks and Roblox, they have the Robux or something.

That's right. Yeah.

Right.

And so use your real money to get it initially, but then while you're in the game, which would be like a virtual reality, you have to use that money in order to buy different things. So now that you say it like that, I'm like, ah, okay. It's like a fortnight.

You got it. You got it. Yeah, that's right. Any kid who's played a video game knows what a token is. Absolutely.

Gotcha, Gotcha. Okay, so with that being said, let me switch gears just a tad because I want to talk about.

Because there's been talk about, for instance, the US Government getting a Digital currency. And then there's people that's like, oh, gosh, they're trying to control us, that type of thing.

So what do you think about central bank digital currencies and is this the right direction or are we just catching up?

Well, okay, money. There was a time when we would carry hordes of cash in our wallet and pay each other and then look for change and stuff.

And as the young people know and the young people in the audience know that increasingly they don't want to do that. They want to pay digitally. Right? They want to pay using your phone.

And right now, when you use your phone to tap on Starbucks, the back end of that is still the traditional credit card that you, you know, that we were accustomed to in the physical period, in the physical era. And that credit card has become digital. Right? In other words, you don't need to see a physical card.

You can put that information on your phone and your phone transacts for that. So that transition is now continuing. You know, it's taking a long journey.

And that journey includes the money in your bank account is now available for you to use and spend in any which way you want according to your own lifestyle in a digital form. So that's your real money. And then that transitions even more to a point where it's not even the money in your bank account.

It's a token that you create that gets transacted. And we just talked about Bitcoin as being one of the tokens.

So what governments around the world have started thinking a lot about, and especially because some of the larger countries, including China, have, you know, have experimented with this, is to for governments to issue the token rather than for you and I to issue our own tokens, you know, and that's what central bank digital currency is.

It is a token issued by the central bank, you know, and the fear is that if it's a token issued by the central bank, the central bank can issue the token and give it to you directly. You don't need a banking system for that token to reach you.

And then when you take that token and when you use it, the central bank actually knows what you're doing with it. Because that whole ledger on the token, all the information on that token, the central bank has access to it.

And because of blockchain technology, you've got the whole ledger, meaning the whole history of use of that token. So that freaks a lot of people out and say, wow, I don't want the government to know, you know, what I'm doing. Because cash was Wonderful.

Like it's anonymous, meaning that, you know, when I give a dollar to someone else, nobody knows that I gave that dollar. And when that dollar goes on to somebody else, nobody knows that it's, you know, it's passed through three hands and mine was one of them.

So it's, it's totally anonymous. And you want that with digital tokens.

Now, the good news is, and I say this from experience and my expertise in the industry, that the central bank digital currency experiment is not working very well because the governments that have initiated them are finding themselves getting into all sorts of problems, one of which is if you create a token just like Bitcoin, then you don't need the banking system.

And then they scratch their head and say, so we will still pass it through the banking system and force the banks to be the distributor of the tokens.

And then in the countries where they've already gone live with it, the banks don't want to cooperate because the banks make more money from swiping your credit card because they make a fee out of it. And they make additional money because you probably under red you owe the bank money and stuff like that.

So, so they make really good money on the credit card transaction, whereas they make almost nothing on a central bank digital currency. Now, the interesting thing about the US is that the central bank, the Federal Reserve bank, is just in the process of launching its Fed now program.

And a lot of people mistake the Fed now program for a central bank digital currency. And the truth is, and take it from me, okay, they are totally two different things.

FedNow is the digital value of your money that sits in your bank account being able to be used digitally to pay anyone you like instantaneously. So in the old days, when you write a check, it takes three days for that check to clear.

And two banks sit on that process, and both banks make money from the float. That means the value of the money that sits in the.

In the balance sheet, you know, but in today, you are able to tell the bank that, you know what, pay my friend Jim now. And the money gets transferred instantly.

And for that to happen, the Federal Reserve bank needs to build a bank information system communication system that sits on top of your phone and uses the telecommunication network to make that transaction take place instantly. And that's a beautiful thing. And guess what? Many countries around the world already have this. And it changes how people live their daily lives.

Like you're having a meal with someone, you want to pay that person, you just transact instantly from your bank account to that person's. Phone and then into that person's bank account. So that's convenience, and it's about time the US has this level of convenience.

However, central bank digital currencies and the new digital payment platforms requires a totally different infrastructure, which the work on that hasn't even started, so don't worry about it.

Interesting. So just to clear the air.

Yeah, let's clear the air. Because, yeah, there's too many people asking this question. You know, this is sinister.

Like, you know that FedNow is a precursor to central bank digital currency. They're totally two different topics, you know. And you want to know where payments works the best today? Go to Africa. Why?

Because they never had the credit card in the first place. So they don't have the payment information infrastructure. Right. The banks paying each other and all that in place. And so they keep it really simple.

At the end of the day, what is the payment? It's actually a piece of information that is transacted between you and your buddy. So.

And if you can send a text message for free, technically you should be able to send a payment information for free. And so FedNow is taking us one step closer to that.

Awesome, awesome. So pretty much FedNow is bringing us back to the basics.

Yeah, exactly. Why should you be paying the bank like 3% for a transaction? If not you, it'll be your merchant, and it's a cost.

So payment may not ever be free, totally free, but the first thing is that it's got to be convenient. And that's what digital is making payments into.

You really don't have to worry from anything to a drink in Starbucks or paying your rent and stuff, and you actually have more control because then you can tie your payment to your software and then time when you want to make those payments, plan your. Your expenses as you like it. So all that convenience is what digital was meant to bring. And I think that finally FedNow brings that.

Now, the banks resist even that because they love their credit card. They love the fact that you have your credit card on your Apple pay and that every time you pay, you actually max out your credit.

And they make money from that and they make money from the transaction fees. But FedNow actually makes it cheaper and faster. And the only way that the feds can implement this is by rule of law.

That is they're forcing it down the banks.

Interesting, interesting. So this is something that the banks are fighting against because they would actually be making less money.

That's right.

If you drew a chart of who's involved in getting money From Jim to Joe, you'd be surprised the number of players in there who are getting a cut out of it. And digital makes that smaller so that fewer people need to be in the process. And actually that's the future of finance.

You introduced me as a financial futurist.

So the big thing in finance is that we are now getting into a world where the role of the intermediary, that is the role of the bank or any number of intermediaries is decreasing.

If I can make a payment in Bitcoin between me and my friend directly and there's absolutely no bank involved, then why should I need a bank to make a payment for ordinary money, like pay my rent, for example? Why should my rent go to a bank? Now the thing is that because banking is regulated, that role is still there.

And the regulators would like to see an intermediary in there because there's also problems of fraud and uncertainty and so on. But the idea is to reduce that role and reduce the profits that are generated for the intermediary.

Yes, yes. And I'm like, have you ever done a TED Talk? Cause I feel like this is a TED talk.

I appreciate you so much with breaking this all down for me and my audience. And I know I've learned a ton and you've given me some things to think about as well as the audience.

So with that being said, I know you have a book out. What is that book? If people were interested in learning more about you or learning more about the book.

Okay, my name is Emmanuel Daniel. So if you go into my blog page, emmanueldaniel.com you'll see the book.

It's, it's called the Great Transition, the, the Personalization of finances here. And I have on my book cover the picture of an ice cube.

So what I'm saying is to everyone, okay, you don't have to know finance to understand what I'm talking about.

And I say that, you know, there was a time when ice was something that you saw out of the lakes and put it on horse drawn carriages, you know, carried hundreds of miles to the city. And then it finds its way into, you know, to keep fish fresh or into your gin and tonic. And what is ice today?

It's, it's something that you produce, you're in total control of in the refrigerator, in your home. And money is like that.

You know, the dollar that you have in your pocket might have sold around the world twice, subject to inflation rates, exchange rates, bank charges, all security costs, all that, all kinds of factors that is really not in Your control. So, you know, and you worry about inflation, for example, and whether the value of your money can hold over a period of time.

Now, the personalization of finance is we are heading in the direction.

We may not entirely reach there, but we are heading in a direction where one day that you and I can transact with each other currency or something of value which we produce ourselves in our own refrigerators. And in finance, the idea of refrigerator, it's like, what's the magic of refrigerators? It's a synthetic chemical called cfc.

So in that book, I describe what the CFC of finance is going to look like. And here, and then here's where I get a little bit technical. I talk about identity, value verification and information.

If the banking system, or rather if the technologies that are challenging the banking systems, if they got these four elements right, you've got a refrigerator in your home.

Interesting, Interesting. So much to think about. Well, I will.

There's so much to think about. Yeah, I mean, you know, just think of it as heading in that general direction where eventually you'll have more control over your money.

Gotcha, Gotcha. Okay, Well, I will definitely have all of that information. Information in the show notes.

If people were interested in connecting with you other than the book, so maybe on social media, where would they find you?

Oh, Jesse, Manuel, Daniel, and on my blog, you know, drop me a note. Happy to, happy to, you know, answer any questions. Because I think that by answering questions, I also know where the questions are coming from.

And sometimes I learn a lot, you know, so I'm very happy to hear from anyone.

All right, perfect. Well, I'll make sure I have all of that in the show notes. And I appreciate you so much coming on the podcast and having this TED Talk with us today.

Tiffany, you do, you do a great job.

I mean, you, your other programs, I've listened to them and you break down, you know, ideas and, you know, the biggest thing about money is keep it simple. Right. So that's what you do best. And I love your show for that.

Oh, thank you so much. Yes, definitely try to keep it simple over here. No, absolutely.

It is.

For sure. Well, thank you so much, Emmanuel, and I hope you have. Have a wonderful rest of your day.

You too. Bye.

Bye.

Thank you for listening, joining, and being a part of the Money Talk with Tiff podcast this week.

You can check Tiff out every Thursday for a new Money Talk podcast, but if you just can't wait until next week, you can listen to previous podcast episodes@moneytalkwitht.com or follow TIFF on all social media platforms at Money Talk with T. Until next time. Spend wise by spending less than you make. A word to the money wise is always sufficient.