TLDR
- US government shutdown has lasted 22 days, making it the second-longest federal closure in history and delaying crypto legislation.
- A leaked Democratic proposal requiring KYC and AML rules for DeFi triggered heated arguments between senators and crypto industry leaders.
- The CLARITY Act crypto market structure bill is still expected to pass by 2026 despite current delays.
- SEC has paused approvals for crypto ETFs and IPOs during the shutdown, affecting long-term industry development.
- Prediction markets suggest the shutdown may continue into mid-November, potentially breaking the 35-day record.
The United States government shutdown entered its fourth week on Wednesday, marking 22 days of federal closure. This makes it the second-longest shutdown in US history.
The extended closure has forced the Senate to focus on reopening the government. Other legislative priorities have been pushed aside, including crypto market structure regulations.
The timing affects a critical window for the crypto industry. The Senate had planned to work on matching the House’s Digital Asset Market Clarity Act during this period.
Heated Confrontation Over DeFi Regulations
A tense meeting occurred Wednesday between Democratic senators and crypto industry executives. The confrontation followed the leak of a Democratic proposal requiring know-your-customer and anti-money laundering rules for decentralized finance platforms.
Democratic senators accused industry representatives of working as an extension of the Republican Party. Lawmakers warned that public criticism of the proposed legislation would slow regulatory progress.
Bo Hines, former director of President Trump’s Working Group on Digital Assets, questioned the senators’ response. He asked why lawmakers were upset that the crypto community reviewed policy proposals before they became law.
The leaked proposal sparked widespread criticism from the crypto community. Industry leaders expressed concerns about imposing traditional financial regulations on decentralized systems.
SEC Work Halted During Shutdown
Federal agencies can only use essential employees during the shutdown. This restriction has stopped the Securities and Exchange Commission from advancing crypto regulations.
The SEC has paused work on exchange-traded product approvals. Initial public offering processes have also stopped during the closure.
Cody Carbone, CEO of the Digital Chamber, said the lack of tax clarity could prove more damaging long-term. He noted that time is running out for passing key legislation.
Some crypto operations have continued normally. Caitlin Long, CEO of Custodia Bank, reported her company resolved a patent matter during the shutdown.
The halt in SEC approvals could create long-term problems for the crypto industry. Companies waiting for regulatory clearance face extended delays.
CLARITY Act Still Expected by 2026
Wisconsin Representative Bryan Steil said the CLARITY Act remains on schedule for signing by 2026. He told CNBC he hopes the Senate will move quickly once the government reopens.
White House economic adviser Kevin Hassett predicted the shutdown could end this week. He said moderate Democrats would likely help reopen the government if Republicans gain additional support.
The longest government shutdown on record lasted 35 days during Trump’s first term. Prediction markets on Polymarket and Kalshi forecast the current closure extending into mid-November.
Kristin Smith, president of the Solana Policy Institute, said political progress has not stopped completely. She cited Wednesday’s meetings between industry officials and senators as proof.
Summer Mersinger, CEO of the Blockchain Association, stated that efforts to build crypto regulations continue despite the shutdown. Industry leaders remain engaged with lawmakers on policy development.
The crypto industry is urging lawmakers to find a resolution. Carbone said Americans and the crypto sector are both feeling the effects of the extended closure.
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