Emerging Markets, Stablecoins & Why You Should Look Beyond the U.S. | Amy Oldenburg

Transcript

Introduction

I think the thing with EM is the US has been just blazing for like a decade now. Everyone's kind of sitting in those allocations. If we see any sort of allocation away from the US, it doesn't take too much capital to start moving some of these markets. If we look forward on some of these markets, we do think there's still an opportunity for that dollar to weaken going forward. Definitely beneficial to not all of our markets, but a lot of our markets. Obviously, it's not going to be a straight line, but I would definitely keep an eye on the rest of the world. >> This episode is brought to you by Vanex Semiconductor ETFs. You'll hear more about the VANX Semiconductor ETF, ticker SMH, the largest semiconductor ETF, and its newer VANC Fab Semiconductor ETF,

ticker SMHX, later in the show. Blockworks Digital Asset Summit, crypto's premier institutional event, is back in London this October 13th to 15th. You've got top speakers from Black Rockck, Circle, Coinbase, the UK Parliament, and Athena, all under one roof. I'll be there as well, hosting a live forward guidance episode with Quinn and a few others. So, if you want to see us record in the flesh or meet some of the other legends on the Ford Guidance community, this is your shot. Notable macro names like Michael Howell of Crossber Capital and Jeff Park are already confirmed with more coming.

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All right, everybody. Welcome back to another episode of Forward Guidance. We are recording here live in Soul, Korea at the Origin Summit in partnership with Blockworks and Story Protocol. And I'm super excited to be joined today by Amy Goldenberg, who's the head of emerging markets equity at Morgan Stanley. but uh super excited to sit down with you for a little bit and and chat emerging markets, chat crypto, and where the two worlds collide. >> Thanks so much for having me today. It's a great time to be here. I was actually here the same week last year. So, um a continuation and another year of what's going on in the emerging markets in Korea.

>> There you go. Nice. So, I heard on the panel you mentioned that you've been doing EM for 25 years now and you're at a crypto conference. How does how does ESCorv what's that journey like? You were you were in EM and now you're fascinated by crypto. walk us through that journey. >> Well, we're at a crypto conference, but actually a number of our portfolio companies or or that companies that have been in our portfolios over the years are also here. So, uh the convergence comes pretty close to our day-to-day business. Um but just the backstory of like the crypto connection to I actually started in tech before I went to Morgan Stanley. Um, I was part of the internet era of 99200, building the first websites for Fortune 500 companies. And

even back then, I had friends that were building um, music file sharing uh, companies. So, it's kind of coming full circle that we're back at an IP an event that's focused on IP of music and creator content and everything else. Um, because back then we were just trying to distribute it across the internet at that point. Um, I also have spent so much time in emerging markets. I did trade emerging market FX and so you will see a lot of emerging markets people in the crypto space. Um the ideas are the same, the volatility is the same. Uh and we're very much used to um some of the same dynamics with all of the decades that emerging markets has dealt with with the FX and just the craziness of the markets.

>> Yeah, absolutely. No uh no shortage of variance and volatility in the space. >> Exactly. >> Um okay, so yeah, you spent all that time in EM. Yeah, we're recording here in Korea. I'm sure you travel a lot for your job. And it's there's always this interesting contrast where crypto skeptics are, you know, a lot of them that live in, you know, western countries, the US, they're like, well, you know, I have Venmo or whatever. What is what what is it missing for me out of here? Like, I can send cash to my friend pretty much instantly, but I feel like the narrative is very different in other countries outside of those Western countries. So I'm just curious like what has your experience been like when you go to these countries that drive this belief in crypto as a useful technology?

How Emerging Markets Are Embracing Crypto

>> Yeah, there's so many different layers of it and I think really to start out with anyone that's coming from the developed world if they hadn't don't have some sort of family connection back to the emerging markets if they haven't spent time living there. They don't really understand the challenges that many of these markets face. I mean it's not even about sending payments. It's just like let's start with like having uh a bank account. A lot of people in these countries the unbanked population is still huge. Um you know banks the other thing is a lot of times the banks in many of these markets have been unreliable. The the currencies the currencies had devalued significantly.

Um so you know there's there's a number of different layers that you can point to as to why crypto took hold. I think the also there's an underpinning of this which goes back to you know the hardware um which is in the developed market we had fixed line uh you know telecom for so long and we're a little bit slow to the mobile game in the emerging markets they just leapfrogged that that fixed line infrastructure and went straight to mobile so the mobile natives across the EM world are huge um we've seen even on the crypto side like when they still had flip phones I And people can't think about like there's actually people in the world that still use flip phones, but in some parts of the world where

internet was slower, connectivity was slower, you actually had folks that figured out how to make solutions to even uh have payments available on flip phones. So that's starting to go away. We're starting to have more internet access and connectivity. We're starting to have smartphones. Um, and there's many markets that I deal with where um, their smartphone's probably the most valuable asset that they have in their life other than the roof that they sleep under. Um, you know, their work, um, their banking, uh, their social community, their media, everything is coming through that smartphone. So, it it's just a total different dynamic than what we have in some of the developed world.

>> Yeah, that's interesting. I want to double click into stable coins specifically and sharpen the question specifically around how you think emerging market countries are viewing them because obviously most stable coins are US denominated and that is great for the US. It's, you know, it's a new marginal buyer of US debt. But as you know, often times when you have currency crises in emerging markets, things like capital flight or capital controls come to mind. And so I'm just curious like if you look at examples of high inflation countries where the currency is getting debased and you see this withdrawal from that that currency and potential capital flight from that. How do you think emerging market governments are going to

Stablecoins Transforming Emerging Economies

think about stable coins where if they have if their if their residents have this option to opt out of this eroding currency? >> Does that get banned? What do what do you think about all of that? So maybe a couple points to put out there to like just set the groundwork for stable coins. Like stable coin is a very very new thing. I mean it really has not been out there. Even if you look at the volume on uh you know USDC or tether it's really been within the last four or five years that we've seen that J curve really pick up. And even for the transactions that are going on the majority are happening overseas. I think 80% of all US dollar stable coin transactions are overseas. It's not not US. I I think you do hit on a a point

though. Um the Genius Act has just totally supercharged this discussion. I mean, not many people were talking about stable coins two years ago in the crypto space, right? We were talking about bit, you know, Bitcoin, NFTts, any everything else under the sun. stable coins was not really um you know talked about other than to make sure your transactions were getting done or in the emerging market space if you were moving things maybe remitting money or moving assets ac cross across border um but I think that the real question now is how these other countries react we're sitting here in Korea um president of Korea has made an announcement about uh a stable coin one um so it'll be interesting to see kind of how that plays out and what that

means for the market. Um we have seen some CBDC projects, you know, a little bit different come out there, but none of them have really take off to none of them have really taken off in any sort of significant way. Um and I guess the question is like what is the future? And and we talk about this a lot. I haven't heard any real good answer. Do do we have a a a world where like every company has their own stable coin and every country has their own stable coin and we just make this totally complex um space to live in or is there some other future where you have a couple like we have now right and there's use cases. I think the second piece of this which is uh regularly debated is will it stay stable coins or do we have other

tokenized assets like tokenized money market funds or yield funds because the other thing too is if you can just pay and transact straight from a tokenized money market fund and pay for whatever you need. Why would you go money market fund stable coin stable coin transfer? you would just go money market fund to to payment and you could be generating yield um the entire time until that transaction happens. Um, so I think, you know, there's different use cases here, um, that we're talking about, but I think it's still a little early to understand how this plays out with countries rolling out their own stable coins. But right now, I mean, it's really 99% uh, US dollar, which look, you have

another buyer of treasuries. We could see that. I think it's I think that makes um, stable coins about eighth or so in terms of holder of treasuries in the world. um that could definitely ramp up pretty quickly. So that is a benefit to the US. Um the real question is how how the rest of the world responds to this massive acceleration we've seen in 25. >> Breakthroughs begin with semiconductors. With over $23 billion in assets under management, the VANX Semiconductor ETF, ticker SMH, is not only the largest semiconductor ETF, but it has also outperformed the next largest semiconductor ETF. It is built on an intelligently designed and constrained index that includes the whole sector

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stack from design to manufacturing. Historically, this unique construction and methodology have helped SMH outperform its closest ETF competitor. Check out the table below. Go to van.com/smhelix to learn more. As always, investments in blockchain technology involve risk, terms, and conditions apply. Do your own research. Yeah, you mentioned a couple things there and I'll hone in on the domestic perspective of stable coins. Obviously, you're at Morgan Stanley. Would love to just hear, yeah, what's Morgan Stanley as a whole thinking about stable coins right now. And what do you hear from other major banks in the US in terms of I see some of them coming forth with their own version of a stable coin.

Banks vs Stablecoins

There's some that, you know, JP Morgan's been using like an internal blockchain, I think, for a few years now. So, yeah. What are what are you hearing from Morgan Stanley as a whole and other competitive major banks in the US? Yeah, I think with some banks like JP Morgan, they have a huge corresponding banking business around the world. Um, their their stable coin is very valuable to them even internally just with like improved operations across the board. Um, we don't have that same business model at at our bank. So, we're thinking about it maybe a little bit differently. I think there's a lot a lot of questions around what it does to bank deposits, um, what it does to lending businesses if you don't have those bank deposits.

um in in you know many banks around the world that depend on that deposit base in order to have lending. So I think very quickly if you do have a world where say you know these deposits are more actionable and yielding in some sort of way and that impacts your lending then the next question to put on the table is like what does the future of lending look like? So you very quickly move down the road of like what's that new business model for lending also. Um, so I think there's lots of debate and discussion right now. Uh, I think the one thing that comes up that that also is debated is, you know, are stable coins going to put the, uh, credit card companies out of business?

You know, I'm not too sure on that, at least in the near to medium term. Um, look, stable coins work super well, but it it's more like a debit card, right? So, it's actually taking money straight out of your bank account to make a payment. the credit card companies um for the developed world um in Europe, you know, um US and then, you know, for the wealthier people in the emerging markets, they're offering a line of credit like that's a different business there. Um so I think they could run on they can actually offer some solutions on off-ramp solutions in the emerging markets, but I don't think that like disruption of of credit cards is going to come as soon as we think it is.

Hottest Trends Across EMs

>> Yeah, fair enough. Um, all right. We are at a crypto conference, but this is also a macro show and you do represent EM. So, would love to just hear a little bit about your your views in the classic EM world right now. It's obviously been a very consequential year in that regard. It feels like >> going into January, my head was like, okay, I think this is going to be the year of FX because there's just going to be so much happening from tariffs to >> Yeah. just resetting the global trade order. So, yeah. How are you thinking about the global EM space right now? You know, I think the thing with EM is the US has been just blazing for like a decade now. And even though we had a bit of a reset earlier this year, because we've seen this pick up again in the US

market, everyone's kind of sitting in those allocations. They still feel that there's more opportunity. And I think there it definitely is something um to that with with some of the um regulatory changes that we've seen in the US. I think the thing that sometimes is missed is what the world looks like in 2025. So we were looking even the other day at asset classes that have done well year to date. >> It's Bitcoin, gold, uh emerging or sorry uh Europe, the European Union and emerging markets, right? So you you you actually have even though a lot of the attention is on the US um you see a lot of headlines around the tariffs and how the tariffs are going to benefit the US

uh but actually a lot of the performance has played out in u these other markets the international markets and and crypto um of all places. So some of that obviously with the deregulation probably helping um and then I think there's like that adoption cycle that keeps playing out but it's also you know store is store of value part of the discussion on the crypto side and then for em is this been a place that's been underinvested for the last decade and now with if it's everything from tariffs um or the innovation trends that are starting to pick up em was you know they were at lower points of valuation they didn't have a lot of debt in many of these markets so they can really pick up and start to uh play out. Also, if we see

any sort of allocation away from the US, it doesn't take too much capital to start moving some of these markets. So, we have seen markets like even the smaller um emerging European uh countries. They've done extremely well this year. Um I know you know you wanted to talk a little bit about FX, but at one point this year the dollar had I mean it's recovered a little bit now, but the dollar had fallen about 9%. that was really had kicked in some nice performance in uh uh regions like Latin America that were really picked up some of that weakness in the US dollar. Uh and we do think if we just look you know forward uh if we look forward on some of these markets we do think there's still an opportunity for that dollar to weaken

going forward. Definitely beneficial to not all of our markets but a lot of our markets. Um and then you have a lot of these innovation trends. I mean today we're talking about AI, we're talking about digital assets. Um you know I think there's different elements of digital assets in blockchain too because um is if you quickly get into the discussion around agentic AI the question is how do you pay your agents to do work and then all of a sudden you have to pull in the digital asset discussion again. So, I think we're going to start see we're going to start it's going to take a number of years, but we're going to start seeing more convergence of some of these stories coming together and really forming uh a more holistic picture of like what the

world will look like in 5 to seven years. >> Yeah. Um my last question hinted at it already, but it feels like a lot of the theme for the first half this year was is this the end of American exceptionalism? That was at the time where it felt like the whole world was overwway US equities compared to the rest of the world. And then you have this Yeah. 10% down move in the US dollar euro performance a lot of foreign currencies did really well and then their equity markets did really well so you have that but then on the other side you have this technological innovation AI theme that is very strong here in Korea very strong in the US and it feels like those two themes collide so yeah which one do you think wins out >> that rotation to the rest of the world

Innovation 3.0 in China & EMs

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Innovation 3.0 in China & EMs

>> Yeah, I'm well. You know, I I think I think it's not um it's not black and white. I think you can have both of them win out. I think and I think they're somewhat connected. I I think the hardest thing for investors these days is um you know, it's very extreme. We just keep finding you know, I mean, even you think about like it wasn't that long ago that you could go and buy Bitcoin at like 16,000. That's crazy. Like compared to where we are today and I think it's the same thing even if we look at like investing in China. There was a point not too long ago and I'm going to say like 12 to 18 months ago where investors and and we even have products that are exchina products. We had investors saying I do not want any exposure to China. I want an ex for for whatever

reason and there's various reasons you know now China's up over 40% um you know over um you know the last year or so. this is this is pretty extreme and now we have investors saying like I need to have access or I need to have exposure to China and want want to know all the trends if it's biotech if it's robotics um they do lead on this on this um you know innovation 3.0 0 as we refer to it on on uh on with some of our macro research. I mean they really it's amazing to see when you're in China and I spent um you know part of June there.

Um we have Tesla in the US. They have like 20 plus 20 plus like electric vehicles that are on the streets. You see robots, you know, all over the place and there's multiple companies that are building that. um you ride their trains if I I mean I would die for their train infrastructure in the US. It would make our lives like so easy. Um so there's so many things that that they really are just delivering on and um you know they have that ability. We we we can see that also in places like the Middle East. I think um Saudi Arabia and the UAAE are both pushing AI quite significantly. Um you know that's another trend that we see playing out and you know the markets

have done pretty well. uh selectively in the Middle East, too. So, I think we're just going to continue to see this play out. Obviously, it's not going to be a And, you know, if people feel they need to to reallocate some of that capital that's done so well in the US for the last decade, uh it's going to be, you know, just another beneficiary, another tailwind for the emerging markets. >> Yeah. Awesome. Well said. Well, Amy, really great to get you on forward guidance. Enjoyed that a lot. It's uh it's fascinating to find these people that are just living at the intersection of macro and crypto because that's just my where my brain is at every day. So, it's awesome.

Final Thoughts

>> That's awesome. Thanks so much. Good to see you.