Crypto Bill Faces Delays Amid Historic 38-Day Government Shutdown

The U.S. government shutdown has now reached a record 38 days, marking the longest such period in history. As the Senate gears up for a crucial vote on a funding bill, the outcome will be pivotal in determining the reopening of Washington.

Key Takeaways

The U.S. government shutdown has reached a historic 38 days, impacting legislation, including the crucial CLARITY Act on crypto regulation.
The Senate is preparing to vote on a funding bill that requires bipartisan support and is crucial to ending the shutdown.
The economic implications of the shutdown could hinder GDP growth by up to 2%, affecting millions of federal workers and small businesses.
Regulatory bodies overseeing cryptocurrency are working with limited staff, causing delays in the review of crypto ETF proposals and other legislative initiatives.
Market predictions show skepticism about a quick resolution to the shutdown, potentially affecting cryptocurrencies and overall market stability.

Crypto Bill Held Hostage by 38-Day Government Shutdown as Senate Prepares Critical Vote

This political impasse has stalled many legislative initiatives, including the eagerly awaited CLARITY Act, which seeks to provide a framework for crypto market structure.

The Economic Impact of the Shutdown

The Senate is expected to vote this week on a Republican-supported bill aimed at ending the shutdown and providing funding for several federal agencies for the remainder of the fiscal year. This bill requires at least 60 votes to pass. While Republican leaders are cautiously optimistic, there is still uncertainty about whether enough Democrats will be on board.

Senate Majority Leader John Thune spoke to reporters, expressing hope but acknowledging the unpredictability of support, especially from Democrats.

The standoff began on October 1 due to disagreements over budget allocations, particularly regarding healthcare subsidies linked to the Affordable Care Act. Democrats are pushing for an extension of tax credits benefiting around 24 million Americans, while Republicans believe these discussions should take place after the government reopens.

Currently, about 1.4 million federal workers are affected, with approximately 700,000 furloughed since early October. The shutdown's economic and social impacts are worsening as federal employees are missing paychecks, and various agencies, including the Federal Aviation Administration (FAA) and the USDA, are reducing their services.

A court in Rhode Island recently ordered the Trump administration to restore full funding for the Supplemental Nutrition Assistance Program (SNAP), which had been reduced to partial payments. The administration is appealing this decision, arguing that funding should depend on congressional decisions. Nearly 42 million Americans rely on SNAP, costing over $8 billion a month.

Economists forecast that the extended shutdown could cause significant damage to the U.S. economy. The Congressional Budget Office estimates that the situation may result in a decrease of up to two percentage points in fourth-quarter GDP growth, potentially draining between $10 billion to $30 billion weekly.

Small businesses depending on federal contracts and loans are starting to experience financial difficulties, coupled with declining consumer spending as millions of workers are unpaid.

The Future of Cryptocurrency Legislation in Limbo

The government shutdown has also crippled regulatory activities in Washington. Agencies responsible for overseeing financial markets, such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), are functioning with minimal staff. This development has led to the suspension of reviews for pending applications, including several proposals for crypto exchange-traded funds (ETFs).

The legislative momentum for digital asset regulation has come to a halt. The bipartisan CLARITY Act, which aims to clarify how cryptocurrencies and stablecoins are regulated, gained traction in late October. Senators John Boozman and Cory Booker reported that their committees were collaborating "daily" to finalize the bill and anticipated a vote before Thanksgiving. However, as the government shutdown continues into its sixth week, that timeline now seems uncertain.

Coinbase CEO Brian Armstrong shared with CNBC that approximately 90% of the issues with the bill had been resolved and that Thanksgiving was still a potential deadline for its completion.

The impact of the shutdown has extended beyond the political sphere. The liquidity crunch caused by the shutdown, worsened by the U.S. Treasury General Account holding back funds while agencies remain closed, has put pressure on risk assets. Bitcoin has fallen from its recent highs and is now testing long-term support levels, as investors grapple with limited market liquidity and uncertainty regarding fiscal policy.

Moreover, prediction markets show increasing doubt about a swift resolution to the shutdown.

Market Predictions

Data from the decentralized platform Polymarket indicates that traders believe there is a 59% chance the shutdown will last beyond November 16, with only a 13% chance of it ending before mid-month.