The crypto crash has become political. Democrats are warning that the ongoing government shutdown is setting the stage for another market disaster, arguing that paralysis at federal oversight agencies leaves American investors dangerously exposed.Representative Maxine Waters, the top Democrat on the House Financial Services Committee, made the accusations in a statement marking the 21st day of the shutdown, which she blamed on the Republicans. “These risks are only amplified as Trump and Republicans in Congress work to integrate crypto into the traditional financial system without first establishing the proper guardrails — increasing the likelihood of future crashes just like this one that could more rapidly spread to traditional finance,” Waters wrote.The Trump White House denies responsibility and blames Democrats for the government closure. Waters’ warning follows the October 10 market meltdown, when cryptocurrencies and tech stocks plunged in value after US President Donald Trump threatened 100% tariffs on Chinese imports and announced new export controls.According to Waters, the selloff “left investors with billions of dollars in losses” as traders fled digital assets for traditional safe havens such as US Treasury bonds and gold. Bitcoin plunged 14.6%, Ethereum by 21%, Dogecoin sank more than 50%, and the $TRUMP coin — a memecoin associated with Trump supporters — dumped 63% at its lowest point.Since taking office, Trump has introduced a wave of pro-crypto policies. His appointments in key government positions, such as the Securities and Exchange Commission, have followed suit with efforts to rapidly create regulations for digital assets.Democrats have used Trump’s stance to beat the president with corruption allegations, given his family’s sprawling crypto empire. They say that his family has benefitted from his policies. “It’s open corruption,” the late US Representative Gerry Connolly told DL News in May.The White House refuted the allegations.“President Trump’s assets are in a trust managed by his children. There are no conflicts of interest,” Anna Kelly, the deputy press secretary, told DL News in May.Regulators in limboWaters said the risk of another crypto meltdown is compounded by the shutdown’s impact on US financial watchdogs, with 90% of the SEC staff furloughed and most enforcement activities suspended.The SEC, and Commodity Futures Trading Commission are effectively shut down, she said. The SEC currently “lacks the resources and personnel to even respond to emergencies like this one.”That vacuum of oversight, Waters warned, is arriving at precisely the wrong time. The October 10 flash crash has already prompted calls for an insider trading probe after analysts spotted a wallet that deposited millions into the Hyperliquid decentralised exchange just before the crash. The wallet took a heavily leveraged short position on Bitcoin and Ethereum and allegedly profiting more than $150 million when prices collapsed.“This very serious allegation demands a thorough investigation by Wall Street’s cops on the beat,” Waters said. “The SEC and CFTC should be working diligently to get to the bottom of the flash crash, determine whether any wrongdoing occurred, and hold criminals accountable if insider trading or market manipulation is found.”But with the agencies effectively frozen, investors are left without critical protection and “vulnerable to another disastrous meltdown.”Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email [email protected].The crypto crash has become political. Democrats are warning that the ongoing government shutdown is setting the stage for another market disaster, arguing that paralysis at federal oversight agencies leaves American investors dangerously exposed.Representative Maxine Waters, the top Democrat on the House Financial Services Committee, made the accusations in a statement marking the 21st day of the shutdown, which she blamed on the Republicans. “These risks are only amplified as Trump and Republicans in Congress work to integrate crypto into the traditional financial system without first establishing the proper guardrails — increasing the likelihood of future crashes just like this one that could more rapidly spread to traditional finance,” Waters wrote.The Trump White House denies responsibility and blames Democrats for the government closure. Waters’ warning follows the October 10 market meltdown, when cryptocurrencies and tech stocks plunged in value after US President Donald Trump threatened 100% tariffs on Chinese imports and announced new export controls.According to Waters, the selloff “left investors with billions of dollars in losses” as traders fled digital assets for traditional safe havens such as US Treasury bonds and gold. Bitcoin plunged 14.6%, Ethereum by 21%, Dogecoin sank more than 50%, and the $TRUMP coin — a memecoin associated with Trump supporters — dumped 63% at its lowest point.Since taking office, Trump has introduced a wave of pro-crypto policies. His appointments in key government positions, such as the Securities and Exchange Commission, have followed suit with efforts to rapidly create regulations for digital assets.Democrats have used Trump’s stance to beat the president with corruption allegations, given his family’s sprawling crypto empire. They say that his family has benefitted from his policies. “It’s open corruption,” the late US Representative Gerry Connolly told DL News in May.The White House refuted the allegations.“President Trump’s assets are in a trust managed by his children. There are no conflicts of interest,” Anna Kelly, the deputy press secretary, told DL News in May.Regulators in limboWaters said the risk of another crypto meltdown is compounded by the shutdown’s impact on US financial watchdogs, with 90% of the SEC staff furloughed and most enforcement activities suspended.The SEC, and Commodity Futures Trading Commission are effectively shut down, she said. The SEC currently “lacks the resources and personnel to even respond to emergencies like this one.”That vacuum of oversight, Waters warned, is arriving at precisely the wrong time. The October 10 flash crash has already prompted calls for an insider trading probe after analysts spotted a wallet that deposited millions into the Hyperliquid decentralised exchange just before the crash. The wallet took a heavily leveraged short position on Bitcoin and Ethereum and allegedly profiting more than $150 million when prices collapsed.“This very serious allegation demands a thorough investigation by Wall Street’s cops on the beat,” Waters said. “The SEC and CFTC should be working diligently to get to the bottom of the flash crash, determine whether any wrongdoing occurred, and hold criminals accountable if insider trading or market manipulation is found.”But with the agencies effectively frozen, investors are left without critical protection and “vulnerable to another disastrous meltdown.”Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email [email protected].