If you are one of 38 million Americans who applied for unemployment insurance since March, you might have encountered any number of difficulties and delays resulting from archaic software and overwhelmed state insurance programs. The COVID-19 pandemic spurred an unprecedented amount of people to use the Unemployment Insurance system (UI) first established following the Great Depression, a fact that has become achingly obvious after numerous technical difficulties and reports of people still not getting their stimulus check nine months into the pandemic.

The Biden administration hopes to turn around the wary attitude toward digital banking and fintech in the country. In the past decade, countries like China and Estonia have far outpaced the U.S. in adopting digital identity technologies and fintech innovations. China recently adopted a digital currency system, called Digital Currency Electronic Payment (DCEP), that utilizes blockchain technology to enable users to make transactions and transfer money with each other, with the long-term mission of seeing DCEP being used globally and competing with the American dollar.

It’s rumored that Gary Gensler, former Commodity Futures Trading Commission (CFTC) chairman is in consideration for the position of Securities and Exchange Commission (SEC) chairman. If so, his expertise in cryptocurrency would suggest an increased emphasis on building out a regulatory framework for the technology, an initiative that has largely been stalled by the current SEC chairperson, Jay Clayton.

Biden’s Focus on Digital Identity and the Digital Dollar

Gensler, who is already leading Biden’s financial policy transition team, will bring extensive experience from both Wall Street and Washington and, if appointed as SEC chairman, will look to establish a regulatory framework for how financial institutions should handle digital assets.

Fintech and digital identity could have immense potential for revolutionizing public services such as healthcare and welfare, especially with regards to unlocking new avenues for economic access and equality.

“Fintech has a unique runway to tell a story about expanding access,” said Isaac Boltansky, director of policy research for Compass Point Research and Trading. “The fact that we’re still talking about sending people checks in 2020 should be deeply frustrating to everyone involved. So I think there will be a willingness, if not an eagerness, to examine the financial architecture.”

“Fintech is an area where that may happen simply because there isn’t a natural Democratic or Republican position on many, maybe most, of the issues,” said Rep. Bill Foster (D-IL) in an interview with CQ Roll Call. “It’s clear that fintechs are becoming increasingly important, and that they’re also going to be an important tool to deal with the problems of the underbanked people and the maldistribution of wealth.”

The Biden administration may also put special attention on establishing a digital dollar in light of foreign counterparts such as China making significant progress in the realm of digital currency. A digital dollar would be a necessary innovation to enable the Fed to keep pace with financial innovation and participate in global payments.

Closing up Fintech Loopholes

The Biden administration will look to close loopholes that many fintech companies are exploiting under the current administration. One of these is ending a fintech charter established under the Trump administration that allows fintech companies to get a banking charter at the federal level, rather than going state by state.

“I think we’re going to see a revival of anti-fraud regulations, financial regulation and tech regulation that avoids fintechs becoming a kind of loophole out of the financial regulatory regime,” said Robert Hockett, a professor at Cornell University Law School. “That’s going to be good for everybody except for the criminals.”

Biden takes office at a key time of major fintech innovations and digital identity breakthroughs. Who he chooses to lead financial policy will tell the story of how his administration will handle this new era of digital finance.

ABOUT THE WRITER

Lydia You is a computer scientist from Princeton University living in New York City. She is a Tech Innovation Fellow at Identity Review covering the intersection of global tech policy, internet culture and the future of digital media.

Contact Lydia You at lydia@identityreview.com.

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