U.S. Government Shutdown Hits 38 Days: Crypto Regulation Stalls as CLARITY Act Freezes

The U.S. government shutdown has now stretched into its 38th day, making it the longest in American history. What started as a budget disagreement has turned into a complete halt of federal operations. Because of this political standoff, major bills have stopped moving in Congress, including the CLARITY Act, a key law that could finally bring clear rules to the crypto industry.

Government Still Locked, Economy Feeling the Pain

The Senate is getting ready to vote on a funding bill that could reopen the government. To pass, both Republicans and Democrats need to agree. The issue holding everything up isn’t crypto or spending, it’s healthcare. Democrats want to extend tax credits that help millions of people afford health insurance. Republicans want to reopen the government first, then discuss healthcare later.

As a result of this shutdown, about 1.4 million federal workers are caught in the middle, and nearly half a million aren’t getting paid. Many have already missed paychecks, causing financial stress. Government services are slowing down, airports are short-staffed, and federal agencies have paused important work.

Having said that, even food assistance programs are also affected. A court recently ordered the government to fully fund SNAP, a program that helps 42 million Americans buy groceries, after payments were reduced. The government appealed the decision, saying Congress must approve funding.

Economists say the shutdown is damaging the economy. Every week the government stays closed, the U.S. loses $10–$30 billion. Growth could drop by up to 2%, and small businesses relying on government funds are running out of cash.

Crypto Regulation Frozen in Place

The shutdown isn’t just affecting workers, it has brought crypto progress to a standstill. Agencies like the SEC and CFTC are operating with minimal staff. This means reviews for crypto ETF applications are paused, delaying decisions that investors have been waiting for.

The CLARITY Act, a bipartisan bill that would finally define how crypto and stablecoins are regulated, was on track to move forward. Senators involved in the bill said discussions were happening daily, and that a vote could happen before Thanksgiving. Coinbase CEO Brian Armstrong even said that nearly 90% of the bill had already been worked out.

But with the government shut down, nothing can move. Washington is frozen, and so is progress on crypto.

Crypto Market Starts Feeling the Impact

The shutdown is also affecting the markets. With government agencies unable to release funds, liquidity is tightening, and investors are becoming cautious. Bitcoin has pulled back from recent highs as uncertainty increases. Prediction platforms reflect the same mood. According to Polymarket traders, there is nearly a 60% chance that the shutdown will continue beyond November 16.
Analyst Tyler highlights the irony that while everything in D.C. feels frozen, the discussions around digital assets and crypto policy are the only things still progressing.