**US Government Shutdown Hits Record 40+ Days, Stalling SEC Crypto ETF Approvals**
The United States is approaching a historic milestone with the government shutdown surpassing 40 days, making it the longest in the nation’s history. This unprecedented closure has halted many federal operations and caused significant delays in financial regulatory processes, notably those managed by the U.S. Securities and Exchange Commission (SEC).
### Government Shutdown Creates SEC Backlog
The ongoing shutdown has severely impacted the SEC, which oversees the approval of new cryptocurrency exchange-traded funds (ETFs). With limited staffing and paused reviews, several crypto ETF applications—from assets like XRP and staked Ethereum (stETH)—remain stalled. According to Kalshi data, there is a 53% chance the shutdown could extend beyond 42 days, nearly five times longer than typical federal closures. The longer this continues, the longer asset managers and investors must wait for key regulatory decisions.
### Investor Interest in Crypto ETFs Continues to Rise
Despite the regulatory slowdown, enthusiasm for digital assets remains robust. Between October 18 and 25, six XRP ETF proposals are pending review. Additionally, VanEck has filed for a Lido-issued Ethereum ETF, and 21Shares submitted an application for a 2x leveraged HYPE ETF. A number of new altcoin-backed and leveraged ETF proposals also entered the pipeline last week.
Charles Schwab has reported a notable surge in crypto-related engagement among its clients. CEO Rick Wurster shared that cryptocurrency remains one of the most frequently discussed investment areas. Approximately 20% of Schwab’s clients now hold U.S.-listed crypto ETFs. Furthermore, website traffic to Schwab’s crypto portal saw a 90% increase over the past year, highlighting strong retail and institutional interest even amid regulatory pauses.
### Analysts Predict Faster ETF Approvals Post-Shutdown
Market analysts expect that once the government reopens, the SEC will expedite processing the backlog of crypto ETF applications. This anticipated acceleration in approvals is likely to spark renewed activity in the crypto market and boost trading volumes for altcoins and other digital assets.
Financial experts emphasize that investor confidence has remained resilient despite the ongoing delays. The combination of high demand and paused regulatory action may result in a sharp market reaction once approvals resume. Many see the current period as a strategic entry point before a potential post-shutdown market rebound.
### Legal Perspectives on the SEC Approval Process
Fox Business journalist Eleanor Terrett noted that not all ETFs require direct SEC approval. For example, the Teucrium XRP ETF, registered under the Investment Company Act of 1940, did not require explicit authorization because it holds Treasuries, cash, and swap receivables rather than digital assets. Consequently, it went into effect automatically after the statutory waiting period.
In contrast, spot crypto ETFs registered under the Securities Act of 1933—such as those for Litecoin (LTC), Solana (SOL), and XRP—do require active SEC approval.
Legal analyst Bill Morgan explained that ETF approvals are overseen by the SEC’s Division of Corporation Finance, which might continue essential functions during the shutdown. However, he cautioned that delays remain possible due to reduced agency activities. Morgan added that approvals could still happen in late October if the government reopens soon, though uncertainty prevails.
Summarizing the market sentiment, Morgan remarked, “Crypto never fails to surprise,” reflecting the cautious optimism shared by many investors and experts.
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As the longest government shutdown in U.S. history continues, crypto investors and asset managers await clarity on ETF approvals. Meanwhile, strong investor interest and growing engagement suggest robust demand for digital asset products once regulatory operations return to normal.
https://coincentral.com/us-shutdown-beyond-40-days-to-delay-crypto-etf-approval-but-demand-spikes/
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