Over the next week, the United States government faces the possibility of a shutdown as House Speaker Kevin McCarthy grapples with internal political pressures regarding spending plans. This decision could also have adverse effects on the progress of crypto bills awaiting a vote, potentially impacting the future of cryptocurrency regulation.
Back in July, lawmakers from the House Financial Services Committee voted in favor of several crypto-focused bills. The Financial Innovation and Technology for the 21st Century Act (FIT), the Blockchain Regulatory Certainty Act, the Clarity for Payment Stablecoins Act, and the Keep Your Coins Act garnered support and were among the more notable bills passed by the committee. These bills could potentially be brought to a House floor vote during the current session of Congress.
However, a government shutdown would halt lawmakers’ ability to move forward with any legislation until the issue of funding the US government for the next fiscal year is resolved. While government shutdowns are not uncommon in US history, the reasons behind them have shifted from concerns over funding to political maneuvering.
Many experts within the crypto industry, such as Ron Hammond, the Blockchain Association’s director of government relations, have voiced concerns about the possibility of a shutdown and its negative impact on the digital asset industry. Hammond noted the fractured divisions within the House Republican party and the Senate’s independent direction, making a shutdown increasingly likely. He mentioned that “for crypto, the longer the shutdown goes on, the more various bills including FIT/market structure and stables get pushed.”
Several of the bills awaiting a vote have bipartisan support and are likely to pass in floor votes, according to Hammond. However, there are also political challenges that could hinder their progress. Lawmakers have until September 30, before the start of the next fiscal year, to reach an agreement on the spending bills.
If a shutdown occurs, it would effectively halt the operations of non-essential federal agencies, including regulatory bodies like the US Securities and Exchange Commission and the Commodity Futures Trading Commission, which oversee digital assets.
As of September 25, Speaker McCarthy was reportedly planning to introduce spending bills that include provisions on abortion access restrictions, funding for a US-Mexico border wall, and other initiatives favored by far-right members of the Republican Party. However, these initiatives are unlikely to gain approval from Democrats.
The possibility of a government shutdown comes at a time when some lawmakers are increasingly pushing for crypto regulations. Senator Kirsten Gillibrand has said she is on track to convince her party members to embrace more digital asset regulations to move it from a partisan to a bipartisan approach. She expressed optimism that through conversation and socialization of the ideas in their bill, it will become more bipartisan.
The impact of a government shutdown on the crypto industry could be significant. It would delay the implementation of much-needed regulatory frameworks and hinder the progress of bills aimed at fostering innovation and clarity in the sector. Additionally, it could create uncertainty and instability in the market, as regulatory oversight would be temporarily suspended.
The digital asset industry has been growing rapidly, attracting significant investments and attention from both retail and institutional investors. In order to foster its continued growth and development, clear and comprehensive regulatory frameworks are crucial. A government shutdown would create unnecessary hurdles and delays in achieving these goals.
It is important for lawmakers to prioritize the needs of the digital asset industry and work towards finding a resolution to the issue of government funding without causing significant disruptions. The future of cryptocurrency regulation and the growth of the industry depend on the ability of lawmakers to navigate through these challenges and provide a stable and supportive environment for innovation and investment.