Overcoming The Uphill Battle Of The Bureaucratic Backlog: Wall Street May Have To Wait For Crypto Products
While it is good news that the US Government is now in session for many, we'll need to be something more than patient when it comes to movement on the regulation side for cryptocurrency products in the investment world.
Overall, the government shutdown has been one of the longest spanning shutdowns in US history; spanning December 22nd right on to finally conclude, albeit temporarily on January 25th. It's because of this that the wide array of federal organizations have had to close up shop for the same period of time, furlowing staff for the duration.
One of the added downsides of this shutdown is that this includes bodies such as the Securities and Exchange Commission (SEC) as well as the Commodity Futures Trading Commission (CFTC). One of the knock-on effects of this shutdown? Launches and proposals for cryptocurrency products have had to either wait for the doors to re-open, or pull their proposals, as a result.
But with the government now back in action, this means that the Commission, as well as the Commodities Trading Commission, will now have to contend with a grand total of five weeks worth of bureaucracy that has piled up over the same span of time. And the odds of any of these applications, crypto or otherwise, receiving anything in the way of expedited treatment in light of the shutdown are not looking likely at all.
With over 4,500 federal employees returning to work now, one of the outstanding issues that are at the forefront of the minds of Jay Clayton, the head of the SEC, for example, is how best to steadily transition from such a long span of time being out of commission, to business as usual?
Government Shutdown – The Lasting Damage
If there's at least one record that was broken in the past months in federal history, it's that this shutdown is one of the longest that has taken place in the history in the United States, breaking the previous record set under the Clinton Administration. But while this is an interesting fact, it still doesn't detract from the fact that there will be some lasting repercussions for the federal entities that have had to close down as a result of the shutdown.
This is according to the Chief Operating Officer for the Wall Street Blockchain Alliance – Steve Erlich, and he is certainly right to have concerns like this. One of the further concerns that can be added to this is the fact that this re-opening of federal bureaucracy is going to be a temporary one. A short-lived one due in large part to the ‘temporary' truce between President Trump and Congress.
How short-lived? If no solution is found on the matter of funding for Trump's proposed border wall by the 15th February, then the shutdown will recommence.
Too Late For Crypto? For Some – Yes
While the public will go on thinking that federal organs can go on working as if nothing happened, the reality is that a lot of applications, especially from cryptocurrency projects, have been profoundly and negatively impacted because of this high-political stunt.
Ehrlich went on to further comment that there has been a profound loss of momentum from startups and young companies because of this shutdown.
“Conversations that had been ongoing between startups and relevant regulators such as the SEC (including its newly created FinHUB) about business models and plans have likely lost critical momentum and will take time to recover.”
If we ever needed some unfortunate examples of this we have it from the likes of VanEck/SolidX's proposed Bitcoin Exchange Traded Fund proposal in January. Because of the shutdown, the CBOE was forced to withdraw this application after spending months in consideration by the SEC. The CEO of VanEck, Jan Van Eck went on to directly to cite the government shutdown as one of the major reasons for the decision to withdraw the ETF.
Van Eck went on to explain that, which the companies involved in creating the ETF proposal had been working assiduously to ensure that the SEC has all the answers it needs to consider the application in the best possible light. While this set a good long term precedent for this ETF application, the shut down has put a metaphorical spanner in the works of this application.