Efforts to craft the first clear regulatory framework for digital assets in the United States have been thrown into chaos by Washington’s ongoing government shutdown.
The deadlock has frozen communication between agencies and lawmakers, leaving the long-awaited crypto market structure bill in limbo.
The bill, designed to finally clarify the division of authority between the SEC and CFTC, was considered one of the most promising steps toward comprehensive crypto regulation. But as thousands of government employees remain furloughed, the legislative machinery has slowed to a crawl.
Negotiations on Pause
Behind closed doors, most staff responsible for refining the bill’s language are absent. According to Kristin Smith of the Solana Policy Institute, the timing couldn’t be worse. “Momentum was finally building,” she said. “Now we’ve hit the biggest pause the industry has faced all year.”
Market observer Ron Hammond from Wintermute believes there’s still a slim chance of progress before year-end, estimating the odds at about 60%. But he warns that a prolonged standoff could push the bill well into next year – or beyond.
Election Politics Complicate the Timeline
As the 2026 midterm elections draw closer, crypto legislation is becoming less about policy and more about politics. Lawmakers on both sides are wary of backing complex financial reform during campaign season.
Some Democrats have even woven Donald Trump’s crypto ventures – including his involvement with World Liberty Financial and the TRUMP memecoins – into their election messaging. Others, like Rebecca Liao, CEO of Saga, argue that digital-asset policy shouldn’t be sidelined. “Crypto regulation is not a niche issue anymore,” she said. “But the longer the shutdown drags on, the easier it becomes for politicians to avoid it.”
Complexity and Contention
Even before the political gridlock, the bill was proving difficult to finalize. Lawmakers remain divided on how to define ancillary assets that fall outside securities laws, and how to apply existing money transmission rules to decentralized systems.
Former SEC counsel Teresa Goody Guillén criticized the draft’s heavy use of “decentralization jargon,” saying the language risks confusing both regulators and innovators. Meanwhile, Summer Mersinger of the Blockchain Association maintains that bipartisan agreement is still possible – if the government ever reopens.
Market Feels the Fallout
Uncertainty in Washington has already spilled into the markets. Bitcoin dropped below $121,000, dragging the broader crypto market cap down to $4.15 trillion. Roughly 180,000 long positions were liquidated as traders rushed to lock in profits from Bitcoin’s recent record high of $126,000.
Some analysts attribute the sell-off to profit-taking, while others point to a growing fear that regulatory paralysis could slow institutional inflows. Hammond summed up the mood: “Investors aren’t sure what comes first – policy clarity or political theater. Until that’s resolved, markets will stay cautious.”
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Source: https://coindoo.com/crypto-legislation-faces-major-setback-as-u-s-government-shutdown-drags-on/