Washington D.C. often moves at a glacial pace, especially when it comes to new rules. But sometimes, even the glaciers hit a snag. The U.S. government found itself in a shutdown last week, a quiet pause that has certainly complicated the path for cryptocurrency legislation.
- A U.S. government shutdown has significantly slowed down the progress of cryptocurrency legislation, particularly in the Senate.
- The shutdown has furloughed agency staff crucial for advising lawmakers on drafting crypto bills, creating a temporary but impactful delay.
- Despite the setback, industry experts believe crypto market structure efforts remain a high priority and are likely to see progress, though the shutdown introduces significant uncertainty regarding timing.
For two weeks now, federal agencies have been largely silent. Congress failed to agree on funding, sending many employees home. This means fewer hands on deck for the very people drafting important crypto bills.
Lawmakers in the Senate Banking Committee were deep into crafting a bill. This bill aims to regulate the crypto industry at large. It would decide which digital assets fall under the Commodity Futures Trading Commission (CFTC) and which belong to the Securities and Exchange Commission (SEC).
Meanwhile, the Senate Agriculture Committee, which oversees the CFTC, has yet to release its own version of the bill. This is a key piece of the puzzle.
Agency staff usually offer vital advice to lawmakers during these drafting periods. With many now furloughed, this process hits a wall. Kristin Smith, president at the Solana Policy Institute, sees this as “probably the biggest setback at this time.” Staff simply cannot work on it.
Still, Smith believes this is a small, temporary delay for market structure efforts. She notes it remains a high priority for both the House and Senate. Discussions are continuing, even with the shutdown in place.
The next step for the Senate Banking Committee is a formal vote on its bill. Ron Hammond, head of policy and advocacy at Wintermute, thinks the shutdown will “definitely be affecting when that vote in Senate Banking happens.”
Hammond gives a 60% chance for a Senate vote on a crypto market structure bill before the year ends. Many bills get rushed through as the year closes. The shutdown, however, remains the largest unknown.
If the shutdown drags on for a month, Hammond says his analysis would change. The timing is delicate.
The Senate’s bill will eventually need to align with progress made in the House. The House already passed the Clarity Act over the summer. That was a big step, though it differs from what the Senate is working on.
Looking further ahead, Hammond puts the odds of a market structure bill becoming law before the November 2026 midterm elections at 80% to 90%. This assumes the Senate finishes its version soon.
But if the Senate’s work stretches into the spring, that changes the math significantly. Hammond suggests the chances drop below 50% then. Time, it seems, is of the essence.
Political Currents and the 2026 Midterms
The closer we get to the 2026 midterms, the more the political landscape shifts. Lawmakers start thinking about reelection. Their focus can move from legislation to campaigning. This can affect how they approach crypto policy.
Rebecca Liao, co-founder and CEO of Saga, and a member of President Joe Biden’s 2020 campaign, suggests a short shutdown won’t derail crypto policy. A couple of weeks is manageable.
“I don’t think it’s going to be deprioritized as a result of the government shutdown,” Liao said. She added that it is “too important to the Trump administration.”
A longer delay, however, would not be good, Liao warned. This brings us to another layer of complexity.
Democrats have increasingly voiced concerns about President Trump’s ties to digital assets. This has added a tricky element to legislative efforts. Bloomberg estimated President Trump’s family has profited around $620 million from crypto ventures.
These ventures include the World Liberty Financial DeFi and stablecoin project. They also include the TRUMP and MELANIA memecoin launches. The Trump family also holds a 20% stake in the mining firm American Bitcoin. President Trump and his three sons are listed as co-founders of World Liberty Financial.
From a Democratic viewpoint, supporting crypto might become less appealing. Liao suggests they might see it as a “really simple flashpoint for people to rally around” to help them keep their seats.
“If you say that the Trump family has siphoned away billions of dollars in this asset that most people have no idea what it is, I think it’s perceived as a good talking point for the Democrats heading into the midterms,” she explained.
The Fine Print: What Still Needs Work
Passing a crypto market structure bill is a much tougher challenge than the stablecoin bill. That one, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS Act), made it to President Trump’s desk over the summer. He signed it into law soon after, creating a federal framework for stablecoins.
“Shutdown or no shutdown, this is a really big task that these committees have and it is important that we get this right,” said Kristin Smith of the Solana Policy Institute.
Smith pointed out some positive aspects in the Senate Banking Committee’s version. It includes favorable language for software developers. It also addresses how the Justice Department interprets money transmitting. She hopes to see these points in the Senate Agriculture Committee’s version as well.
Many in the crypto industry are waiting to see what the Senate Agriculture Committee’s bill contains. The decentralized finance (DeFi) industry, in particular, is “corraling” around the idea of “ancillary assets” in the Senate Banking Committee’s draft, according to Wintermute’s Hammond.
What exactly are “ancillary assets”? The bill describes them as “an intangible, commercially fungible asset, including a digital commodity, that is offered, sold, or otherwise distributed to a person in connection with the purchase and sale of a security through an arrangement that constitutes an investment contract.” This definition aims to clarify which cryptocurrencies are not securities.
Hammond added that the bill could change quite a bit as amendments are made. This is a living document, after all.
Teresa Goody Guillén, a partner at BakerHostetler and a former SEC litigation counsel, published a paper last month. She argued that both the Clarity Act and the market structure legislation need to be simpler. She feels they are “nearsighted in their reliance on decentralization as the key factor in classifying an asset.”
Goody Guillén also takes issue with the term “ancillary asset” in the Senate Banking Committee’s version. She called its re-labeling of the “subject” of an investment contract as an “ancillary asset” “doctrinally incorrect and confusing.”
Kristin Smith agrees that simplicity is often best. “In a general matter, simple is better,” Smith said. “I think that this is a really complex issue. As a general matter, we want to be able to have flexibility as the technology evolves.”
Another hurdle for market structure legislation comes from banks. They have been lobbying hard to stop crypto exchanges from offering yield on stablecoins. This was not part of the GENIUS Act. But banks are now trying to get this change into the market structure bill. Crypto industry groups have pushed back against this effort.
“It remains to be seen if they’re going to get their final wish in the product,” Hammond noted. He described it as “a battle of the juggernauts in DC of crypto versus TradeFi and there’s a lot of fights being thrown around.”
Summer Mersinger, CEO of the Blockchain Association, emphasized the need for bipartisan effort. She wants the crypto market structure legislation to be done correctly. “There’s genuine momentum on both sides of the aisle, and a shared understanding that the U.S. needs clear rules of the road,” Mersinger stated.
“That kind of alignment doesn’t come often in Washington,” she added. “And it’s why we remain optimistic that Congress can deliver a balanced framework that gives this industry the regulatory clarity it needs to grow responsibly.” The legislative dance continues, with many eyes watching for the next step.
