US Shutdown may slow, but not cripple crypto efforts

US Shutdown may slow, but not cripple crypto efforts

The Impact of a Potential Government Shutdown on the Blockchain Industry

The cryptocurrency industry finds itself in a precarious position as the threat of a government shutdown looms in Washington. This comes at a time when crucial matters, such as the approval of exchange-traded fund (ETF) applications, ongoing court cases, and the progression of crypto legislation, hang in the balance. However, experts suggest that these important issues will not come to a grinding halt, even if they are delayed longer than anticipated.

SEC’s Skeletal Operation

SEC Chair Gary Gensler has already warned that the agency will operate with a limited staff during a potential government shutdown. This is concerning as crucial deadlines are approaching, particularly with regards to the future of easily tradable crypto ETFs. Additionally, the SEC has several court cases that could significantly reshape the U.S. crypto industry. However, despite these challenges, it is unlikely that the SEC will be completely derailed.

During previous government shutdowns, the SEC showcased some flexibility by using reserved funds to continue operations. In 2013, the agency remained open throughout the entire 16-day shutdown period, and in 2018, it managed to keep its doors open for a portion of the record shutdown. Whether the SEC has enough funds this time and decides to stay open remains to be seen.

Temporary Relief from Enforcement

One potential silver lining during a shutdown is that the SEC’s investigations and enforcement activities are likely to grind to a halt, except for urgent interventions to protect investors. This means that the steady enforcement actions against crypto firms may temporarily cease, offering some respite to companies that have yet to face regulatory scrutiny.

The Cash Flow of Courts

While federal government services may be affected by a shutdown, federal courtrooms are expected to continue operating as usual for a few weeks. The judiciary system relies on collected court fees and other sources of revenue to fund their operations. After this initial period, a reduced workload and staffing take over under the Anti-Deficiency Act, with limited personnel handling only specific cases.

The ongoing legal battles between the SEC and prominent crypto platforms such as Binance and Coinbase should continue in the near term. Additionally, criminal trials are constitutionally mandated to proceed, providing assurance to those eagerly anticipating events like the upcoming trial of FTX founder Sam Bankman-Fried. However, some process slowdowns could occur in bankruptcy courts, potentially influencing the outcomes of cases involving bankrupt crypto companies.

Stalled Congressional Progress

Unfortunately, a government shutdown is not likely to help move forward federal legislation addressing the cryptocurrency sector’s need for tailored rules. The legislative process will inevitably stall if the government shuts down, hindering progress on bills related to crypto. The industry has struggled to gain lawmakers’ focus, and a disrupted Congress may divert attention to other pressing matters once the shutdown ends. It is uncertain which issues will take priority after a shutdown, as new concerns continuously emerge.

Although certain bills pertaining to crypto have cleared committee hurdles in the House of Representatives, their success is expected to be limited since the Senate is unlikely to take up the House’s proposals. Former Senator Pat Toomey, who now advises Coinbase on policy matters, believes that the potential pain from a shutdown is overstated. However, he acknowledges that Congress will need to prioritize resolving the budget before focusing on other matters. Therefore, the timeline for introducing crypto legislation on the House floor may be pushed back to November.

If the potential government shutdown lasts longer than previous ones, it may test uncharted waters. The U.S. government has become accustomed to periodic drama from Congress, and initially, the crypto world may not notice a significant difference. However, if the impasse drags on and employees remain unpaid, there will inevitably be heavy repercussions as individuals seek alternative employment, and government offices exhaust their remaining funds.

In conclusion, the blockchain industry faces challenges with the looming threat of a government shutdown. However, important matters such as SEC decisions, ongoing court cases, and the progression of new legislation are expected to continue, albeit with potential delays. Industry players should remain vigilant and adapt to the unfolding dynamics during this uncertain period.