The Biden transition team just added one of the country's most serious thinkers on the future of payments

Blockchains and cryptocurrencies are difficult to understand well enough to take seriously. That’s why the addition of Gary Gensler to Joe Biden’s transition team seems like good news for the cryptocurrency faithful.

All we know about his role is that he will head Biden's financial policy team, and it's too early to know whether that will have any implications for the crypto world. But we have a decent amount of material from which we can start speculating.

First, we know that he knows a lot about the technology, and that's important given the relative lack of subject matter knowledge among Washington policymakers today. Besides that, Gensler has been fairly vocal during the past few years about his views on various regulatory questions that loom over certain digital currency projects, particularly Facebook’s Libra.

Before we go any further, though, let’s be clear: Biden did not hire Gensler for his savviness about cryptocurrency.

In fact, Gensler, who currently works as a professor at MIT’s Sloan Business School, is hardly a surprising addition to the transition team, considering his resume. Prior to landing at MIT, he was chief financial officer for Hillary Clinton’s presidential campaign. Before that, he was chair of the Commodity Futures Trading Commission (CFTC) under former President Barack Obama. 

In all, Gensler served some two decades as a financial policymaker, and before joining the public sector, he spent two additional decades working for Wall Street firms.

More recently, though, he's become somewhat of a cryptocurrency intellectual. Besides teaching at MIT, he's served as a senior advisor at the MIT Media Lab’s Digital Currency Initiative, which is aimed at turning cryptocurrency technology and crypto-economics into real academic fields. 

During Gensler's time at MIT, I’ve had the opportunity to listen to him speak several times on the topics of digital assets and financial technology. My main takeaway: While he’s no crypto enthusiast, he takes the underlying technology very seriously, and seems convinced that it will influence the future of money and payments.

One argument that Gensler has made on multiple occasions during his time at MIT is that digital currency networks like Bitcoin have exposed shortcomings in the payment systems we use today to transfer money around the world. The advantages of digital currency over many of these systems are that it can be traded 24/7 in a permissionless way, it can be transferred over borders in a censorship-resistant way, and it is programmable thanks to smart contracts.

It is these “gaps” in traditional payment systems that Libra aimed to solve, Gensler told the House Financial Services Committee in July 2019. While many policymakers and central bankers around the world would have dramatically negative reactions to Facebook’s proposal, Gensler saw Libra as part of a wider, global trend.

Libra is in important ways reminiscent of what already exists in China, where AliPay and WeChatPay are ubiquitous, and Kenya, where M-Pesa is extremely popular, he told Congress. China and Kenya have already grappled with similar regulatory policy issues to the ones Libra presents, he said.

The question is how best to govern the “reserve” backing the digital money. The People’s Bank of China now requires that services like AliPay and WeChat Pay place all customer funds in non-interest-bearing reserves with the central bank. Regulators in Kenya require that all customer funds be deposited in the Kenyan banking system and prohibit those funds from being loaned out.

“It is important that there are federally mandated eligible investment limitations, liquidity requirements, a ban on lending or fractional banking and operating guidelines transparently set out in regulation,” Gensler said in his written testimony. He recommended that “at a minimum” the Libra Reserve should be regulated by the Securities and Exchange Commission, adding that there was also “some basis” to consider regulating it like a bank. 

He also expressed optimism: “The Facebook Libra initiative, once it is fully living within established public policy frameworks, may help spur greater competition in payments, potentially enhancing access and reducing costs."

More than a year later, Libra is not yet live, but the debate around it is likely to reignite once the new administration settles in. Meanwhile, the idea that the United States needs a better and more accessible payment infrastructure is still very much relevant. The Federal Reserve is even working on its own 24/7, real-time payment system it has called FedNow even as it also researches the viability of a central bank digital currency (CBDC). 

According to the Fed, the new payments system will be ready by 2023 or 2024. So if Gensler were to land a job in the Biden administration, he might be in a position to influence not only how Libra is regulated but also how FedNow is developed. Now we are really speculating, though.

What does this all mean for crypto? That will, of course, depend on the Biden team, and perhaps on Gensler himself.

But to the extent that "crypto" refers to innovative technology for making payments, the Biden team appears poised to take it seriously.