Cryptocurrency Prospects for 2021
Tags: Investing, Regulation, Venture Capital, Cryptocurrency, Digital Asset

John Murray, Research Director, Linqto Inc.

The recent announcement that Gary Gensler will lead Joseph Biden’s financial policy transition team signals an interesting development in the incoming administration’s position on cryptocurrencies and other digital assets. Gensler, who was previously chair of the Commodity Futures Trading Commission during the Obama administration, has considerable street cred in the cryptocurrency arena. As a faculty member at MIT, he directs the FinTech program in the Computer Science and AI Lab (CSAIL) and serves on the board of the Media Lab’s Digital Currency Initiative. In these roles, he mentors graduate students and conducts research on blockchain technology, digital currencies, and macroeconomic policy.

According to Coindesk, other FinTech-friendly academics and macroeconomics experts appointed to Biden’s transition team include: Chris Brummer of Georgetown U, Mehrsa Bradaran of UC Irvine, and Lev Menand of Columbia U, as well as Gensler’s colleague Simon Johnson at MIT.

US policy positions and regulatory decisions on digital assets have already been shifting in a positive direction for some time. In July this year, the Office of the Comptroller of the Currency (OCC) confirmed that federally-chartered banks are permitted to provide custodial services for crypto assets. That guidance was issued under the auspices of Brian Brooks who, several months earlier, had been assigned by Donald Trump to be Acting Comptroller of the Currency. Brooks also has street cred as a digital assets regulator, having previously been a senior executive at Coinbase, as well as serving on the boards of several successful FinTech ventures. Earlier in November, Trump proposed converting his current temporary role to a five-year appointment as Comptroller. But even if that move is confirmed, it’s not clear whether Brooks would retain the position under the new administration.

Brooks’ fate will partly depend on the opinion of Janet Yellen, the former chair of the Federal Reserve Bank, whom Biden has selected as his new Treasury Secretary. In that role, she will essentially be Brooks’ new boss, and the decision whether or not to replace him will be up to her. While Yellen has a reputation of being a Bitcoin skeptic, she also believes US financial policy makers should allow blockchain and digital assets projects to develop, and she has speculated that regulators might have “limited authority” over digital currency systems.

The Financial Times pointed out recently that it’s impossible to make policy in Washington without having influential macroeconomists on your side, and that applies just as much to cryptocurrency policy as to everything else. Macroeconomics is as much of a cultural network as it is a social science, with close links between government policy makers, influential DC think tanks, and top-tier academic institutions. Within this community, even small changes in economic assumptions, models, and predictions can have lasting effects, and Yellen knows well how to work that cultural fellowship.

As the Financial Times noted, if she wants to make long term changes in economic policy, Yellen won’t try to push other senior macroeconomists around. Instead, she’ll signal to the graduate students and new PhDs where they might consider running out ahead and embark on new macroeconomics research programs. If that starts happening in 2021, then Gary Gensler at MIT, along with his academic colleagues and their students, will have an important impact on digital currency policy and the broader FinTech industry in the future. And Brian Brooks may get to keep his job as Comptroller of the Currency as well!