The US government shutdown has disrupted progress in the cryptocurrency sector. Investment bank TD Cowen said this is “bad news” for crypto, noting that the work of federal agencies, particularly the Securities and Exchange Commission (SEC), has ground to a halt.
Last week, Congress's failure to reach a budget agreement effectively shut down the federal government, furloughing numerous public employees. This situation is expected to last several weeks, or even longer. Jaret Seiberg of TD Cowen's Washington Research Group argued that the shutdown has completely halted the SEC's work on policy changes for the crypto industry:
“Unless there is agreement on government funding, it is unlikely the SEC will reverse any significant policy changes for the crypto sector.”
Since the Trump administration, the SEC has been working on regulations to grant exemptions to new crypto products and digital asset companies offering tokenized stocks, but with the current shutdown, all of that work has been put on hold.
Seiberg stated that the closure will not only cause a delay in its duration, but will also take longer due to the backlog of work once employees return:
“This isn't just a delay due to the closure itself. When staff return to work, they will have to both tie up loose ends and deal with urgent matters that accumulated during the closure.”
The SEC's current operating plan only allows for “a limited number of personnel to respond to emergencies.” This has also completely halted the approval process for crypto exchange-traded fund (ETF) applications.
According to Seiberg, with the SEC effectively “closed,” crypto policy is now being passed to institutions unaffected by the shutdown, such as the Fed, the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC):
“We will closely monitor the steps these institutions will take regarding the authorization of banks to issue stablecoins, the storage of crypto assets and the development of tokenization-based payment systems.”
*This is not investment advice.