US federal funding defaults have increased, causing new delays in regulatory decisions involving crypto products. According to reports, the shutdown has lasted more than 40 days in some of the scenarios used by market forecasters, and routine approvals are being slowed due to staffing shortages at federal agencies.
The shutdown continues for the last 40 days
Reports reveal a market estimate that puts the probability of a prolonged shutdown for some parts at around 55%, which traders say complicates the timing for filings and reviews.
The Securities and Exchange Commission is operating with a reduced staff, and that has forced some rulemaking and approval windows to be pushed back. For applicants hoping for a quick sign-off, this may mean waiting longer than planned.
Source: Kalshi
Investor interest remains high
Despite the holdups, investor appetite for regulated crypto products appears strong. According to filings and traffic data cited in market reports, Charles Schwab clients have approximately 20% of the US crypto ETF market in terms of assets under custody, and web visits to crypto information pages have increased by approximately 90% on an annual basis. This shows that demand is not going away while regulators are inactive.
What does this mean for the markets
When reviews go back into effect, some strategists expect pent-up demand to shift to newly approved products. Based on reports, the delay has shifted the calendar rather than derailing the approvals.
Yet the market reaction is not guaranteed to be big; Some money may already be waiting on the sidelines, while other investors have moved on.
Backlog can provide quick response
Regulatory staff will face a backlog when full operations return. Papers waiting for attention may be given priority, and multiple issuers will exert pressure to get decisions approved.
Sources tracking the sector have warned that a sudden cluster of approvals could follow the end of the funding gap, leading to a rapid influx of newly approved funds.
risk beyond time
Shutdown is one of many risks. Reports point to the fact that the approval depends on the agency’s view on legal arguments, compliance steps and market structure.
The lack of temporary staffing delays the work, but that doesn’t change the important questions the regulator needs to answer before signing off. This means that some applications may still be rejected or heavily conditioned.
Featured image from Unsplash, chart from TradingView
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