The United States House of Representatives has rejected a bill passed by the Senate aimed at funding the government, and Speaker Kevin McCarthy’s proposals have so far failed to gain traction with hard-right lawmakers in the House — all actions suggesting that the U.S. government is heading toward at least a partial shutdown starting on Oct. 1.
A U.S. government shutdown, which occurs when Congress fails to pass legislation for funding for the next fiscal year, would effectively stop all federal agencies and departments from doing anything considered “nonessential.” Even if the shutdown were to only last a matter of hours — one in February 2018 lasted less than a day — crypto bills may take a backseat to other policies among lawmakers once activities resume.
Bills for the good or ill of digital assets would be halted amid a shutdown, and financial regulators, including the Securities and Exchange Commission and Commodity Futures Trading Commission, would be running on a skeleton crew. Following a 2019 shutdown, Cointelegraph reported that SEC officials had limited capabilities for enforcement and oversight.
“In the aftermath of a shutdown, it is unclear what issues will rise to the top of the priority list in terms of gathering congressional interest,” Sheila Warren, CEO of the Crypto Council for Innovation, told Cointelegraph. “Apart from funding the government, Congress faces a number of statutory deadlines which will require additional legislative action before the end of the year.“
In July, lawmakers with the House Financial Services Committee voted to pass 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. Should a shutdown occur, no action can be taken on these crypto-focused bills — no amendments, no floor votes.
Warren suggested that congressional priorities could easily shift from crypto to any number of issues arising amid the shutdown, and there will likely be additional distractions as the 2024 elections approach. Treasury Secretary Janet Yellen also voiced her opposition to “House Republicans’ failure to act” in a Sept. 29 speech, claiming a shutdown was “dangerous and unnecessary” and could “cause economic headwinds” in the future.
If we have a government shutdown, a lot of vital work in science and health could be impacted—from cancer research to food safety.
The American people need House Republicans to do their job: fund the government.
— Joe Biden (@JoeBiden) September 28, 2023
Prior to any bills being put forward in the House, many Democratic members of the House Financial Services Committee staunchly criticized Republicans at a Sept. 27 hearing, though the focus was intended to be on oversight of the SEC. Virginia Representative Don Beyer was one of the few Democrats pushing a crypto-related bill amid concerns over government funding, but lawmakers will be unlikely to address the legislation before Oct. 1.
“The imminent shutdown highlights just how hard it is to pass any critical legislation in a split Congress,” the Blockchain Association’s director of government relations, Ron Hammond, told Cointelegraph. “For crypto legislation, the longer the shutdown, the less time Congress has to vote on proposals such as stablecoins and market structure. But the good news is the various crypto bills in the House have strong bipartisan support and likely will see action now in November.”
At the time of publication, the price of Bitcoin (BTC) had dropped below $27,000 but did not appear to be correlated with any news of congressional spending bills or the SEC moving ahead of schedule on delaying decisions for spot Bitcoin exchange-traded funds. In contrast, the price of Ether (ETH) moved above the $1,600 level in the last three days as firms announced their intention to launch ETFs tied to Ether futures the first week of October.
Update (Sept. 29 at 11:55 PM UTC): This article has been updated to include a statement from the Blockchain Association’s Ron Hammond.