Author: Nancy, PANews

As the two parties continue to battle over the budget, the probability of the US government once again entering the "shutdown drama" is increasing day by day, which also means that many non-essential government functions may come to a halt. If the US government really faces the dilemma of closure on October 1, what will be the impact on the cryptocurrency market?

Progress on cryptocurrency-related bills may be delayed

In July of this year, the US House Financial Services Committee passed four digital asset bills, namely the "21st Century Financial Innovation and Technology Act" (FIT), the "Blockchain Regulatory Certainty Act," the "Stablecoin Clarity Act," and the "Keep Your Coins Act." This is the first time the committee has advanced so many cryptocurrency-related bills, which may be voted on by the full House of Representatives during this congressional session. However, a government shutdown will pause lawmakers from advancing any legislation until they resolve the issue of funding for the next fiscal year of the US government.

In response to this, Ron Hammond, the director of government relations at the US Blockchain Association, stated that for the cryptocurrency industry, the longer the US government shutdown lasts, the more likely various bills, including those related to retail/market structure and FIT, will be delayed.

Approval of multiple Bitcoin spot ETFs may be delayed, and some cryptocurrency lawsuits will continue

Based on the review timeline for various institutions' Bitcoin spot ETFs, the US SEC is required to make decisions on multiple Bitcoin ETFs in October of this year, which may include approval, rejection, or delay, including those from BlackRock, VanEck, WisdomTree, and Bitwise, among others. Furthermore, October 13 is the deadline for the SEC to appeal the decision in the Grayscale case, which may provide clues as to how the SEC will consider its position on spot ETFs.

However, according to SEC Chairman Gary Gensler, a government shutdown will affect the SEC's market regulation. "Due to the potential shutdown of the federal government at the end of this month, the SEC's regulatory activities will be severely limited and may not be able to perform some basic functions. The SEC may not be able to evaluate the registration statements of companies seeking to go public, and if a significant event occurs, the agency may not be able to fully regulate the market."

In addition, under the leadership of Gary Gensler, the SEC has initiated multiple lawsuits against the cryptocurrency industry this year, and a shutdown may provide the cryptocurrency industry with an opportunity to "breathe." According to Coindesk, another spokesperson for the SEC stated that if the US government is unable to pass an expenditure bill and shuts down by the end of the month, the SEC will follow its shutdown plan, or suspend lawsuits, unless the situation poses a threat to consumers' property, and will stop reviewing and approving applications for new products. Apart from emergency interventions for investors, most of the SEC's investigations and enforcement activities will gradually come to a halt, meaning that the agency is less likely to continue stable enforcement against cryptocurrency companies, providing a temporary respite for those that have not yet been targeted.

However, Anne Kelley, a former SEC official who now works at Mercury Strategies, stated that although technically the SEC's plan "only allows actions to prevent imminent risks to investors, our markets, or property," it has some budget flexibility in using reserve funds. In 2013, the SEC continued to operate throughout the 16-day shutdown of the entire US government, and in 2018, the agency continued to operate for some time during the record-breaking shutdown. "It will be interesting to see whether the SEC has the necessary funds this time and whether they decide to continue operating."

Furthermore, federal courts may continue to operate normally for several weeks until the Department of Justice exhausts its cash collected from court fees, among other sources. For example, legal disputes between the SEC and Binance, or similar disputes with Coinbase, should still be ongoing. Additionally, John Sparacino, a lawyer at the law firm McKool Smith, stated that if the government continues to shut down, some court activities may slow down, but according to the constitutional criminal procedure, proceedings must continue, such as the case of FTX founder SBF next month, although progress may be slowed.

The cryptocurrency market faces many uncertainties in the market

If the US Congress fails to pass an appropriation plan that becomes law through the president's signature, the government shutdown will begin at 12:01 a.m. on October 1, causing important data such as September non-farm employment, CPI, PCE, and quarterly GDP to be delayed. Particularly for the Federal Reserve, which has always emphasized that its monetary policy decisions rely on economic data, the lack of relevant official statistics, and even if the government reopens, the delayed release of data will bring the risk of policy mistakes. Historically, the longest government shutdown in the US lasted 35 days, and if this shutdown lasts longer, the Federal Reserve may postpone the next interest rate hike at its monetary policy meeting in November, but it is not clear how it will respond.

In response to this, some US officials stated that if the federal government shuts down over the weekend due to lack of funding, the release of key economic data such as employment and inflation will also be indefinitely suspended, thereby affecting the decisions of the Federal Reserve, investors, and individuals. The lack of crucial inflation data may bring uncertainty to investors, leading them to consider alternative assets such as Bitcoin and other cryptocurrencies. However, if the approval of Bitcoin spot ETFs is delayed, it may lead investors to once again adopt a pessimistic sentiment, and the market still faces uncertainty.

Overall, the impact of the US government shutdown on the cryptocurrency market depends on the duration of the shutdown, but at present, this impact is limited, mainly revolving around the approval of Bitcoin spot ETFs and regulatory lawsuits.

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