The approval process for new exchange-traded funds (ETFs), particularly those involving bitcoin, may face delays if the U.S. government shuts down next month. As we approach the end of the fiscal year, hundreds of thousands of federal workers, including a significant number from the Securities and Exchange Commission (SEC), may be furloughed without pay if Congress fails to provide funding.
Gary Gensler, the SEC Chair, recently warned in an interview that the agency would operate with a limited staff during a shutdown. This raises concerns about the agency’s ability to process new ETF applications, potentially leading to delays in their approval. Todd Rosenbluth, the head of research at VettaFi, expressed uncertainty about whether ETFs awaiting approval can move forward during a government shutdown. If the shutdown occurs, the SEC may have to reject new ETF applications or may not have sufficient personnel to properly assess them, possibly allowing launches to proceed.
One example is the decision on spot Bitcoin ETFs, which the SEC has postponed until mid-October. However, if a shutdown takes place and continues for an extended period, the decision may be further delayed. This ongoing uncertainty regarding the approval of spot Bitcoin ETFs frustrates investors and issuers who have been eagerly awaiting a resolution. Todd Sohn, ETF and technical strategist at Strategas Securities, suggests that investor and issuer patience with regard to Bitcoin ETFs is already wearing thin, and a government shutdown only adds to their agitation.
Additionally, analysts warn that listed funds may experience increased volatility during a shutdown. Hector McNeil, co-CEO and founder of HANetf, points out that ETFs are pass-through vehicles, meaning that any impact on the underlying markets will naturally affect ETFs. If markets become unstable during a shutdown, it is likely that investors will pause and wait for more stable conditions before launching new ETFs.
The potential delays and volatility caused by a government shutdown may dampen enthusiasm for new ETFs, especially those involving cryptocurrencies like Bitcoin. The uncertainty surrounding the regulatory landscape, combined with the already existing impatience among investors and issuers, creates a challenging environment for the approval and launch of these investment vehicles.
In conclusion, the looming possibility of a government shutdown in the United States could have significant implications for the approval and launch of new ETFs, particularly those tied to cryptocurrencies like Bitcoin. The SEC’s limited operations during a shutdown may lead to delays in approving applications, adding to the frustrations of investors and issuers. Furthermore, listed funds may experience increased volatility, prompting potential launches to be put on hold until market conditions stabilize. Overall, the uncertainty caused by a government shutdown presents yet another hurdle for the already complex and evolving world of ETFs.
