U.S. Government Shutdown & Crypto
Twenty-eight days ago, the entirety of the U.S. government partially shut down. Negotiations between the Democrats and Republican incumbents have yet to procure results, and hundreds of thousands, if not millions of federal workers have had to provide governmental services without pay. The situation is getting from bad to worse, but what does that mean for Bitcoin (BTC) and the broader crypto sector?
Well, as the shutdown entered its first week, many crypto optimists began to speculate what that meant for this industry’s proposals to American agencies, like Bakkt’s crypto futures application submitted to the U.S. Commodity Futures Trading Commission (CFTC).
For Bakkt, it was believed that the shutdown was bearish, as the CFTC was a victim to the shutdown. For the VanEck, SolidX, and CBOE Bitcoin exchange-traded fund (ETF), one of the most-awaited industry developments in crypto’s history, the shutdown was interestingly deemed a positive, as some claimed that the venture could get greenlighted by default.
However, a crypto-friendly lawyer, based in Washington, DC, claims that this belief is nothing more than unbridled, overly cheery hope. Jake Chervinsky, a government enforcement defense & securities litigation attorney at Kobre & Kim, broke down his thoughts on the matter via a Twitter thread.
Shutdown Doesn’t Improve Bitcoin ETF’s Chances Of Approval
Chervinsky started his 17-part thread by flat out stating that the shutdown disallows the ETF to be “automatically approved.”
0/ The VanEck/SolidX bitcoin ETF won’t be automatically approved just because the US government is shut down.
I’ve seen a lot of confusion & misinformation about how the shutdown affects the SEC and its process for handling ETF proposals. I’ll try to explain here.
— Jake Chervinsky (@jchervinsky) January 18, 2019
The Kobre & Kim attorney, who has gained a large following from Twitter’s crypto zealots, explained that while the U. Securities and Exchange Commission (SEC) is technically shuttered, there’s still a “skeleton crew” that has the authority to make decisions, like the approval or denial of a financial vehicle application. This isn’t speculation either, as Chervinsky noted that just days ago, the SEC issued a deadline extension on a Nasdaq PHLX-related rule change.
So, Chervinsky noted that if the shutdown somehow extends to February 27th, the skeleton crew “should be around to issue an order approving or denying the ETF.” The crypto enthusiast did note that a question remains about what form a verdict will take, speculating that the “order might have less detail than usual.” Anyhow, the American lawyer made it clear that “there’s no reason to think” that the SEC cannot make a proper verdict.
Yet, he did note that if the shutdown continues until late-February, the chance of approval drops to “near-zero,” citing the SEC’s operations plan, which stipulates that the entity cannot review “new financial products” during a government imbroglio. So, in closing, he wrote:
Don’t get me wrong: the ETF could still be approved, especially if the SEC made its decision before the shutdown started. All I’m saying is that the shutdown doesn’t improve the ETF’s chances of approval at all. In fact, the opposite is probably true.
Chervinsky also commented on Bakkt, which has seen its launch pushed back two or three times. Chervinsky noted that since Bakkt’s approval doesn’t have a statutory deadline, the CFTC can continue to stretch out its verdict for months to come.
This recent news comes just after Brian Kelly, the chief executive at BKCM and a CNBC contributor, claimed that a Bitcoin ETF has “no shot” at going through in 2019. In related news, Bitwise Asset Management recently filed a Bitcoin ETF application. Just days prior to the Bitwise development, the Winklevoss Twins, the two behind one of the first, if not the first BTC ETF proposal (which was denied), made it clear that they expect to see such a product through, whether it takes months, years, or even decades.