The possibility of a U.S. government shutdown looms as the House of Representatives rejects a bill passed by the Senate aimed at funding the government. Speaker Kevin McCarthy’s proposals have failed to gain traction with hard-right lawmakers in the House, suggesting that a shutdown may occur starting on Oct. 1.
A government shutdown occurs when Congress fails to pass legislation to fund the government for the next fiscal year. In this scenario, federal agencies and departments would be unable to carry out any nonessential activities. Even a short shutdown could have significant impacts on the crypto industry. During a shutdown in 2019, financial regulators like the Securities and Exchange Commission (SEC) had limited capabilities for enforcement and oversight.
Crypto-focused bills would be halted during a shutdown, and regulators like the SEC and Commodity Futures Trading Commission would be operating with a skeleton crew. In July, lawmakers with the House Financial Services Committee passed several crypto-related bills, but if a shutdown occurs, no action can be taken on these bills.
The priorities of Congress could easily shift from crypto to other issues amid a shutdown, and distractions may increase as the 2024 elections approach. Treasury Secretary Janet Yellen expressed opposition to a shutdown, stating that it could be “dangerous and unnecessary” and cause economic headwinds in the future.
Prior to any bills being put forward in the House, many Democratic members of the House Financial Services Committee criticized Republicans at a recent hearing. While the focus was on SEC oversight, Virginia Representative Don Beyer pushed a crypto-related bill amidst concerns over government funding. However, it is unlikely that lawmakers will address the legislation before Oct. 1.
The longer a shutdown lasts, the more various crypto-related bills, including those focused on market structure and stablecoins, would be pushed back. This could have implications for the crypto market as a whole.
At the time of writing, the price of Bitcoin had dropped below $27,000, but it did not appear to be correlated with news of congressional spending bills or the SEC’s decisions on Bitcoin exchange-traded funds. On the other hand, the price of Ether moved above $1,600 as firms announced their intention to launch ETFs tied to Ether futures in the first week of October.
Overall, a U.S. government shutdown could have significant consequences for the crypto industry, as bills related to digital assets would be halted, and regulatory oversight would be limited. The priorities of lawmakers may shift, and the longer the shutdown lasts, the more delayed crypto-related legislation would be. It remains to be seen how this potential shutdown will unfold and what impact it will have on the industry.
