If the US Congress fails to reach an agreement on a funding bill by September 30, the US government is at risk of shutting down. This has significant implications for the financial sector, particularly for cryptocurrency-based exchange-traded funds (ETFs) regulated by the US Securities and Exchange Commission (SEC).
According to NYDIG, a leading provider of services related to Bitcoin, the duration of a government shutdown in the US can range from one to 35 days depending on the political climate. As a result, this situation has affected the SEC’s ability to evaluate and make decisions on various ETF applications, particularly those related to Bitcoin (BTC) and Ethereum (ETH).
Indeed, the SEC has postponed multiple applications for pending spot Bitcoin ETFs. These ETFs are considered significant because they would allow investors to directly buy and sell Bitcoin through a regulated platform. Notable applicants include BlackRock, Invesco, Bitwise, and Valkyrie.
The SEC recently announced a two-week delay for spot Bitcoin ETFs with decision dates between October 16-19. This development confirms that the federal regulatory agency is preparing for a potential government shutdown. Consequently, the SEC will now have to make a final decision on these applications by mid-March 2024.
Bloomberg’s ETF analyst James Seyffart predicted similar delays for other applicants such as Fidelity, VanEck, and WisdomTree. He also mentioned that the SEC could adopt an approach to review and approve or reject all ETFs at once before this date.
Bitcoin ETFs based on futures have already been launched in the US, allowing investors to track Bitcoin’s price movements through regulated exchanges and profit from these price movements. While approval for spot Bitcoin ETFs is expected, futures-based ETFs were introduced in October 2021 and have since become popular, attracting billions of dollars in assets.
Furthermore, several issuers have recently applied to the SEC to launch Ethereum ETFs based on futures. These ETFs will track the performance of Ethereum futures contracts traded on the Chicago Mercantile Exchange (CME), which started operating in February 2021. The SEC is expected to approve these ETFs next week.
Following the SEC’s postponement decisions and the uncertainty caused by the government shutdown, the price of Bitcoin dropped by 0.38% to $26,933. Traditional assets also closed the week with losses, with gold falling by 0.96%. The S&P 500 recorded a 0.27% decrease, while the Nasdaq Composite saw a slight increase of 0.14%.
Moody’s stated in its latest report that a government shutdown could harm the US credit rating. The rating agency emphasized that such an event would highlight the ongoing difficulties in reaching an agreement between Republicans and Democrats on fiscal policy and raise doubts about policymakers’ ability to address more significant financial problems in the future.