TD Cowen warns US shutdown freezes SEC and stalls crypto progress

The US government shutdown is hindering progress in the crypto ecosystem as government agencies such as the Securities and Exchange Commission (SEC) have reportedly halted their operations, according to a note from investment bank TD Cowen dated Monday, October 6.

This announcement came as Bitcoin spiked past $127,000 today, nearing its new all-time high as macroeconomic uncertainty and mounting political tensions in Washington pushed investors toward alternative assets.

The world’s largest cryptocurrency climbed more than 15% over the past week, rebounding from about $109,000 at the end of September to touch $125,750 over the weekend, according to Bitbio data. At the time of writing, Bitcoin is trading at $124,728.

The government shut down last week because Congress could not reach a common ground on funding. Consequently, it has resulted in several government employees losing their jobs and major restrictions on what federal agencies can do. 

The US government shutdown causes tension in the crypto ecosystem 

Several analysts have raised concerns about the US government shutdown, which might continue for weeks or even longer. 

In reports released by TD Cowen’s Washington Research Group, under the leadership of Jaret Seiberg, the situation seems to be at a crucial stage as initiatives like the SEC’s actions to provide exemptions for crypto-related issues, such as tokenization, are currently stalling.

According to Seiberg’s view on the topic of discussion, he pointed out that he did not expect the SEC to resume its significant policy changes for the crypto ecosystem unless an agreement to fund the government is struck.

Analysts, such as Geoffrey Kendrick, head of digital assets at Standard Chartered, believe that Bitcoin’s role as a safe haven is being amplified by Washington’s gridlock. Kendrick believes that Bitcoin could reach $135,000 in the near term and potentially $200,000 by year’s end if current conditions persist.

Since the Trump administration assumed duties in January, the commission has considered providing exemptions for newly released crypto products and similar help for digital asset companies offering tokenized stocks.

However, considering the current shutdown status, there may be no improvements to these exemptions or any other crypto-related changes, said Seiberg.

TD Cowen further explained that the situation is not evolving around the number of days the government is shutting down, but also the delays that will occur once staff resume work and try to catch up on what they missed. 

To solve this effectively, Seiberg urged that the government agency tackle any urgent matters it could not address during the shutdown.

The SEC effectively halts its operations amid the US government shutdown

The current SEC guidelines reveal that, due to the US government shutdown, the commission is functioning under a plan in which only a limited number of staff members can address emergencies.

The agency has also put a hold on its approval processes for crypto exchange-traded funds. Notably, several of these ETFs were near approval. Examples of these crypto ETF proposals include ones that track DOGE, XRP, and LTC. 

This came after crypto companies submitted these proposals in 2024, after the regulatory environment in the crypto ecosystem became more favourable following President Donald Trump’s pro-crypto stance.

Meanwhile, since the SEC is effectively closed, cryptocurrency policy will shift to other agencies, such as the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (FDIC), which are allowed to continue operating during shutdowns, according to Seiberg.

In a statement, the managing director at TD Cowen expressed that they will continue to watch how banks get authority to issue stablecoins as custodians for crypto assets and create payment systems based on tokenization.