US Government Shutdown: Crypto ETF Delays, Market Impact
US Government Shutdown: A Nightmare Of Delays For Crypto ETFs
The US government shutdown has been causing significant impacts on financial markets, especially in the cryptocurrency sector, as crypto Exchange-Traded Fund (ETF) applications face indefinite delays. This event, described as entering its third week (as of early October 2025 when articles were published), has created uncertainty and hindered the growth of the digital asset market.
The Nature And Causes Of A US Government Shutdown
A US government shutdown occurs when Congress fails to pass spending bills or a temporary budget resolution. This results in many federal agencies suspending non-essential operations or operating with a minimal number of staff. The most recent shutdown began around October 1, 2025, due to deep disagreements between Democrats and Republicans over budget priorities, including healthcare, national debt reduction, and border security.
This marks the 21st shutdown since 1976 and the first since the 35-day closure from late 2018 to early 2019, which was the longest in US history.
Impact On The SEC And Crypto ETF Approvals
Reduced SEC Operations
The Securities and Exchange Commission (SEC) is the primary agency responsible for protecting investors, maintaining fair and efficient markets, and approving new investment products like crypto ETFs. During a government shutdown, the SEC must operate with “extremely limited staff,” prioritizing essential tasks and emergency situations.
Spot ETF Approval Delays
This significantly slows down or halts the entire review and approval process for new financial product applications, including crypto ETFs. In particular, spot crypto ETFs, registered under the Securities Act of 1933, require explicit SEC approval to begin trading, unlike futures ETFs which can become effective after a statutory period.
Analysts liken this situation to a "rain-delayed game," where all activities are suspended and will require time to restart.
Application Backlog And Workload
These delays are not limited to the shutdown period but will extend afterwards, as SEC staff will need time to restart operations and process a massive backlog of applications. This creates a significant bottleneck for new crypto ETF applications.
Scale Of Impact: Numerous ETFs Awaiting Approval
The government shutdown has affected at least 16 pending crypto ETF applications. Additionally, 21 new applications were filed within the first 8 days of October 2025 alone, significantly increasing the existing backlog.
Specific altcoins mentioned in the affected ETF applications include: Solana (SOL), Litecoin (LTC), XRP, Ethereum (ETH), Dogecoin (DOGE), Cardano (ADA), Polkadot (DOT), HBAR
Several firms, such as GraniteShares, are also planning 3X leveraged ETFs based on XRP, Solana, Ethereum, and Bitcoin, and are currently awaiting SEC approval.
Market Reaction And Expert Forecasts
Market Instability And Sentiment
A government shutdown exacerbates economic instability, fosters risk-off sentiment, and can create selling pressure in the cryptocurrency market. It also erodes investor confidence and hinders innovation due to a lack of regulatory clarity.
The initial reaction of the crypto market can be complex. In some cases, Bitcoin and other major cryptocurrencies might see growth, interpreted as "buying the dip" sentiment or seeking safe-haven assets when the USD is under downward pressure. However, a prolonged shutdown could erode confidence and lead to sustained downward price pressure.
Challenges For Monetary Policy
Disruptions in the release of critical economic data (such as non-farm payrolls) due to a government shutdown complicate the Federal Reserve's (Fed) monetary policy planning, contributing to market instability. This lack of official data forces investors to rely on alternative, less verified, and often more volatile private sector data.
An Incoming Wave Of ETF Approvals?
Many experts predict that once the government shutdown ends and SEC operations return to normal, a "wave" or "floodgate" of crypto ETF approvals will open. This could potentially trigger a new "altcoin season."
Despite short-term challenges, the overall sentiment among experts remains optimistic about the long-term prospects of the cryptocurrency market once regulatory hurdles are removed.
Shift In Regulatory Authority
During the shutdown, other agencies such as the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation may continue their work on stablecoin initiatives and asset management, indicating a potential shift in authority amid the disruption. Additionally, the White House is considering a unified crypto oversight plan between the SEC and CFTC, with the potential appointment of Mike Selig to lead the CFTC, signaling a future with better coordination.
Conclusion
The US government shutdown has caused significant delays in crypto ETF approvals, increasing regulatory uncertainty and posing potential risks to the growth of the digital asset market. While the market may exhibit complex short-term reactions, experts remain optimistic that a wave of approvals will occur once the political situation is resolved, ushering in a new era for crypto investment products.
Disclaimer: This article is intended solely to provide information and market insights at the time of publication. We make no promises or guarantees regarding performance, returns, or the absolute accuracy of the data. All investment decisions are the sole responsibility of the reader.