The Government Shutting Down Isn’t Great for Crypto

I was out sick yesterday and so instead of anything resembling a proper newsletter, I have a few thoughts on salient issues of our time, like how an impending government shutdown is probably Not Good News for crypto’s D.C. hopes.

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Wait, I’ve Seen This One Before

The narrative

The last time the U.S. government shut down, it delayed several approvals for companies and slowed down what many in the industry hoped would be greater regulatory acceptance of crypto.

Why it matters

Well, here we are again. But this shutdown looks to be much weirder than the last one.

Breaking it down

There’s a very strong possibility the federal government will be shut down by the time you receive the next edition of this newsletter.

The House of Representatives does not look particularly close to a deal on keeping the federal government running in the short term, with House Speaker Kevin McCarthy facing dissatisfaction from his right flank, decreasing the chances of a continuing resolution that would keep federal employees paid.

During the last shutdown in 2018 and 2019, companies like Bakkt and ErisX (now a part of Cboe) saw much-needed approvals pushed weeks behind. A bitcoin exchange-traded fund application was withdrawn, with one of the executives at the company behind the product explicitly blaming the shutdown.

We’re already seeing the SEC preemptively delay bitcoin ETF applications. Coinbase is also currently looking at an Oct. 11 deadline for a response from the SEC to its Mandamus petition.

My colleague Jesse Hamilton dug into this yesterday for CoinDesk, finding that the shutdown won’t quite be a death knell for crypto projects.

One big concern may be for civil and bankruptcy court cases after the first few weeks, when the courts themselves start to slow down. The SEC may also have a limited litigation team during the time period.

Crypto legislation is also likely to be slowed or halted entirely (though these bills have a limited chance anyway), Jesse wrote.

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