Casey Wagner

The federal government’s budget is set to expire over the weekend, and lawmakers appear no closer to passing legislation that will prevent a shutdown. If Congress doesn’t come to an agreement soon, it could spell trouble for the crypto industry.&nbsp;



The odds of a government shutdown increased Friday afternoon when the House failed to pass its last-ditch attempt to extend the federal budget past Saturday, with the bill losing in a vote of 198-232. The last government shutdown in 2018 lasted 35 days.&nbsp;



“A government shutdown could cost taxpayers $1 billion to $2 billion per day,” Rep. Blaine Luekemeyer, R-Mo., said. 



A government shutdown stops non-essential federal work. A shutdown leaves most federal agencies, including the US Securities and Exchange Commission, with a limited, ‘essentials-only’ staff. Crypto industry members and legal minds are all but certain this limited staff means zero movement on any digital-asset related agenda matters.&nbsp;



“I seriously doubt any of these agencies are going to be able to carry out any meaningful regulatory action regarding crypto in the event of a government shutdown,” Brian Evans, the CEO and founder of digital asset venture capital firm BDE Ventures, said.&nbsp;



The SEC has already pushed its <a href="https://blockworks.co/news/sec-decision-date-bitcoin-etf">decision date for the Ark 21Shares Bitcoin ETF</a> from Nov. 11 to Jan. 10. A shutdown could also result in paused litigation, SEC Chair Gary Gensler said, adding that his staff would be “skeletal.”&nbsp;



“The normal oversight we have on markets will not be possible,” Gensler said during an interview on Bloomberg Television last week.&nbsp;



But having the agency take a step back from crypto might not be the worst thing, Evans said.&nbsp;



“Given the extreme pressure applied by the <a href="https://blockworks.co/tag/sec">SEC</a> and other agencies on the crypto industry of late, a slowdown in such action resulting from a shutdown would be a welcome breather for crypto-industry participants,” Evans added.&nbsp;



Read more: <a href="https://blockworks.co/news/invesco-spot-ether-etf-galaxy-digital-bitcoin">Invesco, Galaxy float latest spot ether ETF proposal</a>



A shutdown would also pause, or at the very least slow down, crypto legislation’s progress on Capitol Hill, political experts said. Several crypto-related bills have advanced through the markup period, but the odds of a floor vote during a shutdown are next to none.&nbsp;



Plus, a shutdown likely will shake up Congress’ priority list even after operations resume as normal, so crypto issues could face further delays.&nbsp;



<h2 class="wp-block-heading">What about pending legal matters?&nbsp;</h2>



Federal courts have said they are equipped to remain funded until Oct. 13, or about two weeks should a government shutdown last that long.&nbsp;



The US District Court for the Southern District of New York (SDNY), where Sam Bankman-Fried’s criminal trial <a href="https://blockworks.co/news/sam-bankman-fried-trial-starting-soon">is set to begin next week</a>, confirmed with Blockworks that his trial will not stop even if the shutdown extends beyond October 13.&nbsp;



The court will continue operating as their employees will be deemed essential. However, there could be hold-ups with other departments like the Department of Justice and US Attorneys office, a representative from the SDNY said.&nbsp;



Jurors could also be financially impacted, the representative added. If the judiciary runs out of money, jurors’ pay would be delayed until a budget is approved. US district court jurors are paid $40 per day of service, plus reimbursements for travel costs.&nbsp;



Jury selection for Bankman-Fried&#8217;s trial is slated for Oct. 3. Should a government shut down occur before then, attorneys are likely to question potential jurors regarding their feelings about delayed payments during the screening process.



Sam Dibble, partner at Baker Botts, added that criminal trials are protected under the Constitution, and will continue through a shutdown. However, the pace of these trials could be slowed depending on which employees are classified as essential. Bankruptcy cases could be another story, however.



FTX, Celsius, BlockFi and Voyager are just some of the crypto companies engaged in <a href="https://blockworks.co/tag/bankruptcy">bankruptcy</a> proceedings.&nbsp;



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federal government

Crypto industry braces for uncertainty as federal shutdown looms

Shalini Nagarajan

The US Air Force (USAF) has for a while experimented with blockchain solutions to manage&nbsp;cash flow and streamline data management operations.



It was already collaborating with blockchain-as-a-service provider SIMBA Chain to develop a blockchain-based system for certain functions including supply chain quality and management.



This week, the Air Force <a href="https://www.businesswire.com/news/home/20230131005262/en/SIMBA-Chain-Awarded-30M-U.S.-Air-Force-STRATFI" target="_blank" rel="noreferrer noopener">selected</a> SIMBA for a $30 million strategic technology initiative, representing a significant bump to its budget for blockchain initiatives.



The investment will go to development of blockchain-powered applications in support of supply chain management by the Office of the Undersecretary of Defense for Research &amp; Engineering, the USAF, US Navy, US Army and the Defense Logistics Agency.



“Our new project for the USAF will pave the way to more efficient and comprehensive management of assets within the Department of Defense supply chain,” Stacy Betlej-Amodeo, vice president of government operations at SIMBA, said in a statement.



In 2021, SIMBA chain <a href="https://simbachain.com/news/simba-chain-raises-25-million-in-series-a/">secured</a> $25 million in a Series A funding round led by Valley Capital Partners. Other individual investors affiliated with tech giants Amazon, Apple, Meta, SpaceX and Microsoft participated in the round, the firm said at the time.



SIMBA previously secured seven contracts with the US Air Force, the most recent being tokenization of its supply chain budget to keep checks on potential risks and imbalances. The first contract was <a href="https://www.newswire.com/news/simba-chain-chosen-for-air-force-supply-chain-security-20979563" target="_blank" rel="noreferrer noopener">executed</a> in 2019.&nbsp;



SIMBA has also worked with other divisions of the Department of Defense (DoD), including a $9.5 million <a href="https://apnews.com/article/technology-business-us-navy-1ba4a0329153b8664e970512a812557d" target="_blank" rel="noreferrer noopener">US Navy contract</a> in 2020 related to secure communications. 



SIMBA&#8217;s platform allows clientele to work with both public, private and hybrid blockchain networks, although it&#8217;s likely the US Air Force would gravitate towards permissioned systems only. Blockworks has reached out to SIMBA to learn more.



The firm isn’t the only blockchain startup to offer such services to the military. Constellation Network has also <a href="https://cointelegraph.com/news/us-air-force-prioritizes-blockchain-security-with-new-constellation-network-contract" target="_blank" rel="noreferrer noopener">worked with the DoD</a> and other partners for secure data transmission, and partnered with the USAF on a data security solution through blockchain encryption.&nbsp;



Analytics unit Chainalysis has also <a href="https://www.usaspending.gov/recipient/93c1b742-3801-7f06-775d-da2c3fff3fd6-C/latest" target="_blank" rel="noreferrer noopener">secured</a> numerous contracts to work with US agencies, including the DoD.



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blockchain

US Air Force Pumps $30M Into Blockchain for Supply Chains

<div id="highlights-block_61ef2c9f0bbd2" class="highlights">
 <ul>
 <li>President Biden is expected to release a comprehensive cryptocurrency policy in the coming weeks, per a report </li>
 <li>The news comes as federal agencies take a closer look at digital assets </li>
 </ul>
 
</div>



Following an uptick in interest from the federal government in digital assets, the Biden administration is reportedly preparing to issue an executive order on cryptocurrency policy.



The Bloomberg report comes as federal organizations have attempted to take on a greater role in digital asset oversight — leading to questions over <a href="https://cms.blockworks.co/hester-peirce-theres-a-jurisdiction-battle-over-crypto-regulation/" target="_blank" rel="noreferrer noopener">jurisdiction</a> of the emerging asset class. 



“Biden might use the power of the pen to appoint an individual crypto or digital assets Czar, having oversight power over a group of multiple partner agencies like the Commodity Futures Trading Commission, Financial Crimes Enforcement Network, the Office of the Comptroller of the Currency and the Securities and Exchange Commission,” said Michael Fasanello, director of training and regulatory affairs at the Blockchain Intelligence Group. “All of the aforementioned agencies have some degree of interest in regulating the digital assets space.” 



While Biden has been relatively quiet on crypto, his administration&#8217;s stance has become more clear. An appointee to the Treasury, Brian Nelson, said <a href="https://cms.blockworks.co/biden-nominee-for-treasurys-terrorism-and-financial-intelligence-unit-prioritizes-new-regulations-around-cryptocurrency/" target="_blank" rel="noreferrer noopener">cryptocurrencies need to be more harshly</a> scrutinized under anti-money laundering law.



In May, the <a href="https://cms.blockworks.co/us-treasury-report-crypto-transfers-of-10000/" target="_blank" rel="noreferrer noopener">Treasury Department</a> moved to require that crypto transfers of $10,000 or more must be reported to the Internal Revenue Service. In a November <a href="https://home.treasury.gov/news/press-releases/jy0454">report</a> by the President’s Working Group on Financial Markets, Treasury Secretary Janet Yellen asserted stablecoins may pose a threat to financial stability. 



And The Federal Reserve recently released its <a href="https://cms.blockworks.co/fed-opens-debate-on-cbdc-takes-no-policy-stance/" target="_blank" rel="noreferrer noopener">40-page report</a> parsing the possibility of a central bank digital currency.



​​&#8221;The federal government has much broader and far-reaching oversight over our financial policy and regulation, and I&#8217;m hopeful that the Biden administration&#8217;s executive order will provide clarity for this groundbreaking and evolving industry,” said Illinois State Rep. Margaret Croke (D-12th District). “It will then be on us at the state-level to align with federal policy, and I look forward to seeing what the Biden Administration announces.&#8221;



The executive order, expected later this year, will examine the economic and security challenges of crypto, according to Bloomberg.&nbsp; The administration is also calling for other government agencies to chime in on how digital assets may impact their work.&nbsp;



“While the specifics of this impending executive action remain to be seen, what is for certain is that private sector businesses dealing with digital assets have had years to prepare for this moment,” Fasanello said. “The industry has had ample time to take stock of the example set by the traditional finance system and create a skeletal model of what further specified regulatory obligations will look like.” 



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