Opinion

The Government Shutting Down Isn't Great for Crypto

It's not that crypto was making speedy progress through D.C., but a shutdown will put a lot of gunk in the wheels.

By Nikhilesh De

Sep 27, 2023 at 3:30 a.m. UTC

Updated Oct 3, 2023 at 4:09 a.m. UTC

By Nikhilesh De

Sep 27, 2023 at 3:30 a.m. UTCUpdated Oct 3, 2023 at 4:09 a.m. UTC

By Nikhilesh De

Sep 27, 2023 at 3:30 a.m. UTCUpdated Oct 3, 2023 at 4:09 a.m. UTC

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.

On a trial-related note, you received preview copies of The SBF Trial, a newsletter we launched last week to keep readers up to speed on Sam Bankman-Fried’s time in court. The trial kicks off next Tuesday. Want to keep receiving the newsletter? Sign up here.

You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.

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 A bitcoin exchange-traded fund application was withdrawn, with one of the executives at the company behind the product explicitly blaming the shutdown.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.

Read more here.

Stories you may have missed

Binance, U.S. Affiliate, Changpeng 'CZ' Zhao File to Dismiss SEC Lawsuit: Binance, its founder and Binance.US have – as expected, filed to dismiss a lawsuit from the U.S. Securities and Exchange Commission.
Ex-Senator Who Once Shepherded Crypto Legislation Sees No Path in Current Congress: Former Senator Pat Toomey (R-Pa.) thinks it’s unlikely that crypto legislation will move through Congress in this term.
UK Just Passed an Online Safety Bill That Will Apply to the Metaverse: The UK’s Online Safety Bill directs companies to check whether users of online platforms will see illegal or harmful (for children) content and find ways of reducing these risks.
A $27M Crypto Loss Reveals a Toxic Mix of Money-Hungry Traders and DAO Idealists: Danny Nelson spent quite a bit of time digging into Nouns DAO, and it shows – this is an excellent read on the messy world of DAO governance.

This week

Monday

18:00 UTC (2:00 p.m. EDT) Creditors for Prime Trust met.

Wednesday

14:00 UTC (10:00 a.m. EDT) The House Financial Services Committee will hold a hearing with Securities and Exchange Commission Chair Gary Gensler.

Ed. note:

I completely forgot to note that there was a House Financial Services Committee markup on certain central bank digital currency bills last week. Catch up on what happened here.

Elsewhere:

(USCPSC) The U.S. Consumer Product Safety Commission released an album. Like, a musical album. Unironically, this rules.
(Techdirt) Mike Masnick over at Techdirt analyzes what recent statements on the former bird site by proprietor Elon Musk might mean for its usage.
(NJ.com) U.S. Senator Robert Menendez (D-N.J.), was indicted on corruption charges last week.

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.

See ya’ll next week!

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.