Second-Longest Government Shutdown Puts Crypto Market Structure Bill at Risk

TLDR

• The US government shutdown has reached 22 days, becoming the second-longest closure on record, stalling crypto market structure legislation progress.
• A leaked Democratic proposal requiring KYC and AML regulations for DeFi sparked public outcry and heated exchanges between industry executives and lawmakers on Wednesday.
• Democratic senators accused crypto industry representatives of acting as an extension of the Republican Party during tense meetings about the CLARITY Act.
• Despite the shutdown, Representative Bryan Steil says the crypto market structure bill remains on track for signing by 2026.
• The shutdown has halted SEC work on crypto ETPs, IPOs, and digital asset market proposals, though some routine operations like patent approvals continue.

The US government shutdown reached its 22nd day on Wednesday, making it the second-longest federal closure in American history. The extended shutdown has created delays for crypto industry efforts to pass market structure legislation.

The closure means the Senate is focused on reopening the government rather than advancing other policy goals. This timing has affected the narrow window for crypto action in which the Senate could match the House’s Digital Asset Market Clarity Act.

Tense Meeting Between Lawmakers and Crypto Executives

A heated meeting took place Wednesday between Democratic senators and industry executives following a leaked proposal. The proposal would mandate know-your-customer and anti-money laundering regulations on the decentralized finance sector.

Democratic senators accused industry representatives of acting as an extension of the Republican Party. Lawmakers warned that continued public outcry over specific provisions would slow the progress of passing regulations into law.

Bo Hines, former director of President Donald Trump’s Working Group on Digital Assets, criticized the reaction. He questioned why Democratic senators were upset that the crypto community could review policy proposals before they became law.

The leaked Democratic proposal caused public outcry within the crypto industry. Sources at the meeting said tensions ran high between both sides during discussions.

Impact on Regulatory Work

Federal agencies can only deploy employees deemed essential during the shutdown. This has stopped regulators from working on rules for crypto governance.

The Securities and Exchange Commission has halted work on digital asset market proposals. Approvals for exchange-traded products and initial public offerings have also stopped.

Cody Carbone, CEO of the Digital Chamber, said the lack of tax clarity may prove more costly long-term. He noted that politically, time is running out for key bills.

Some crypto policy work has continued as normal during the shutdown. Caitlin Long, CEO of Custodia Bank, said her company had a patent matter resolved during this period.

Legislation Timeline Remains On Track

Wisconsin Representative Bryan Steil told CNBC the CLARITY Act is still on track for signing by 2026. He expressed hope that the Senate would move forward quickly after the shutdown ends.

White House economic adviser Kevin Hassett said the shutdown would likely end this week if Republicans gain Democratic votes. He stated that moderate Democrats would help open the government and allow policy negotiations.

Prediction markets on Polymarket and Kalshi forecast the shutdown extending into mid-November. This would potentially break the record of 35 days set during Trump’s first presidential term.

Kristin Smith, president of the Solana Policy Institute, said the closure has not derailed political progress. She pointed to Wednesday’s meetings between industry officials and senators as evidence.

Summer Mersinger, CEO of the Blockchain Association, stated that work on building crypto rules continues despite the shutdown.

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