July 25, 2024
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Industry executives and decision-makers comment on a probable US government shutdown.

The inevitability of a government shutdown in the United States remains uncertain, yet even if such an eventuality were to last mere hours or a few days, the subsequent priorities of lawmakers may not gravitate toward the realm of digital assets. The United States House of Representatives has cast aside a Senate-approved bill designed to fund government operations. Speaker Kevin McCarthy’s propositions have thus far failed to garner support from the hard-right faction within the House. These actions collectively indicate that the U.S. government is poised for at least a partial shutdown commencing on October 1.

A U.S. government shutdown occurs when Congress fails to pass legislation for funding the forthcoming fiscal year. Such an event would effectively grind to a halt all nonessential activities of federal agencies and departments. Even if this shutdown were to endure for a brief period—similar to the one witnessed in February 2018, which lasted less than a day—crypto-related bills may find themselves relegated to a secondary status in the eyes of lawmakers once normal operations resume.

During a shutdown, bills concerning digital assets, whether beneficial or detrimental, would be placed on an indefinite hold. Key financial regulatory bodies, including the Securities and Exchange Commission and the Commodity Futures Trading Commission, would operate with a skeletal staff. Following a shutdown experience in 2019, Cointelegraph reported that SEC officials found themselves severely constrained in terms of enforcement and oversight capabilities.

Sheila Warren, CEO of the Crypto Council for Innovation, remarked, “In the aftermath of a shutdown, it is uncertain which issues will ascend to the forefront of congressional interest.” She added, “Aside from government funding, Congress confronts a slew of statutory deadlines necessitating additional legislative action before the year’s end.”

In July, members of the House Financial Services Committee voted to advance several crypto-focused bills, including the Financial Innovation and Technology for the 21st Century Act (FIT), the Blockchain Regulatory Certainty Act, the Clarity for Payment Stablecoins Act, and the Keep Your Coins Act. In the event of a shutdown, these bills would languish without any action, be it amendments or floor votes.

Warren posited that the legislative priorities of Congress could easily shift away from crypto in the midst of a shutdown, as numerous other issues come to the fore. Additionally, the approaching 2024 elections are likely to introduce further distractions. Treasury Secretary Janet Yellen voiced her opposition to the inaction of “House Republicans” in a speech on September 29, characterizing a shutdown as “perilous and unwarranted” and warning of potential economic headwinds in the future.

Prior to the presentation of any bills in the House, many Democratic members of the House Financial Services Committee vociferously criticized Republicans during a September 27 hearing. Although the intended focus was on SEC oversight, Virginia Representative Don Beyer stood out as one of the few Democrats advocating for a crypto-related bill in light of concerns about government funding. Nevertheless, it seems improbable that lawmakers will address such legislation before the onset of October.

Ron Hammond, the Blockchain Association’s director of government relations, remarked, “The impending shutdown underscores the formidable challenges of advancing critical legislation in a divided Congress.” He added, “In the realm of crypto legislation, the duration of the shutdown directly impacts Congress’s window of opportunity to deliberate on proposals related to stablecoins and market structure. The positive aspect, however, is that the various crypto bills in the House enjoy robust bipartisan support and are likely to witness action, potentially in November.”

At the time of this publication, the price of Bitcoin had dipped below the $27,000 mark. However, this decline did not seem correlated with any news pertaining to congressional spending bills or the SEC’s expedited deliberations on delaying decisions regarding spot Bitcoin exchange-traded funds. In contrast, the price of Ether had surged above the $1,600 threshold in the past three days. This surge coincided with announcements from firms regarding their intentions to launch ETFs tied to Ether futures in the inaugural week of October.