The US federal funding gap has extended, leading to new delays for regulatory decisions related to cryptocurrency products. According to reports, the shutdown has lasted more than 40 days in some scenarios used by market forecasters, and reduced staffing at federal agencies has slowed routine approvals.
The closure extends beyond 40 days
Reports revealed a market estimate that puts the chance of a prolonged close at around 55% for certain periods, which traders say complicates the timing of deposits and reviews.
The SEC is operating with a reduced staff, and that has resulted in some rules and approval windows being postponed. For applicants hoping for a quick checkout, this means waiting longer than planned.
Source: Kalshi
Investor interest remains high
Despite this disruption, investor appetite for regulated cryptocurrency products appears strong. According to filings and traffic data cited in market reports, Charles Schwab clients own approximately 20% of the U.S. cryptocurrency ETF market through assets under custody, and web visits to cryptocurrency information pages jumped approximately 90% year over year. This shows that demand is not evaporating while regulators are idle.
What does this mean for the markets?
When the reviews take effect, some strategists expect pent-up demand to trickle down to the newly approved products. Based on reports, the delay may have simply changed the calendar rather than killing approvals.
However, it is not certain that the market reaction will be significant; Some money may already be waiting on the sidelines, while other investors have moved on.
A growing backlog may lead to a rapid response
Regulatory staff will face a backlog when full operations return. Papers awaiting interest may be given priority, and many issuers will push for resolutions to be approved.
Sources who follow the space warn that a surprise batch of approvals could follow the end of the funding gap, leading to rapid inflows into newly purged funds.
Risks beyond timing
Lockdown is one of many risks. Reports point to the fact that approvals depend on legal arguments, compliance steps and the agency's view on market structure.
Temporary staff shortages delay work, but it does not change the substantive questions the regulator must answer before signing on. This means that some requests can still be rejected or have stringent conditions imposed.
Featured image from Unsplash, chart from TradingView
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