The Breakdown - What the End of the Shutdown Really Means for Crypto

Episode Date: November 14, 2025

NLW looks at what the end of the 43-day government shutdown means for crypto, from the CFTC finally moving toward a confirmed chair and opening the door to regulated spot markets, to the SEC racing to revive its tokenization and ETF agenda. He breaks down how Congress is picking up the stalled market-structure bill, what renewed Treasury spending means for liquidity, and why macro uncertainty is rising even as Washington gets back to work. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Thursday, November 13th, and today we're talking about what the end of the government shutdown means for crypto. Before we get into that, however, if you're enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes. We go to bit.ly slash breakdown pod. Well, friends, after 43 days, the longest government shutdown has come to an end. The deal to reopen the U.S. government was signed by the president late on Wednesday. Funding of federal agencies and programs has resumed, federal workers are returning to their

desks, and the risk of massive flight cancellations over Thanksgiving weekend has been removed. For the crypto industry, however, the reopening means regulatory agencies in Congress can return to pushing through the administration's crypto agenda. At the CFTC, it looks like one of the first orders of business will be to install incoming chairman Mike Selig. Selig is a crypto lawyer who worked at Wilkie Far through the last cycle and enjoys near-unanimous support from industry figures. His confirmation hearing has now been set for next Wednesday, so almost 10 months after inauguration day, we could finally have a CFTC chair. All the other CFTC commissioners resigned earlier this year, with acting chair Caroline

FAM getting ready to finish up as soon as Selig is confirmed. That means that the administration will need to fill out a few more seats before moving forward with the rulemaking process. Although staff have been furloughed, FAM has kept moving policy along during the shutdown. Earlier this week, she confirmed that spot crypto trading, including the use of leverage, will be coming to CFTC regulated venues as soon as next month. That means that TradFi venues like the CME and CBOE will be able to host spot markets for the first time. Institutional demand seems to have been pretty well satisfied by the ETFs, so it's unclear if spot markets on the CME will move the needle that much, but having spot futures and options

all available on the same exchange could make carry trades and arbitrage a little more capital efficient. The move will also mean the first regulated crypto spot markets in the U.S. cementing the idea that crypto exchanges are legal. Most major U.S. exchanges have acquired a CFTC license venue by now, so there shouldn't be any real concern around existing markets. On the SEC side of the house, Chair Atkins has been itching to get back to business since very early in the shutdown. He has made numerous speeches laying out plans for the next policy moves once staff returned to their jobs. Atkins has said he wants to get an innovation exemption set up by the end of the year to allow firms to bring on-chain products to market quickly. The implication is that next year, the tokenization of everything will begin

in earnest. In that same vein, the SEC can now get back to issuing exemptive relief to allow certain crypto products to come to market without regard for current regulations. In the more immediate term, the SEC has a pile of ETF applications waiting for approval. A handful of ETFs went live during the shutdown, including a Salonistake DTF and a couple of less popular all-coin funds. Chris Somm, the chief legal officer of Grayscale, is a little unclear if SEC staff will have further questions for ETF issuers, or if they will just rubber-stamp everyone and open the floodgates. Either way, at some point over the coming weeks, it's likely we get a del-usje of all coin ETFs launching. Now, over in Congress, obviously the major focus is the market structure bill.

Work on the bill has been set back by six weeks, but Ron Hammond the head of policy at Wintermute believes that it hasn't been a total loss. He said, from a lot of our sources that we're talking to, these talks are still happening even with the shutdown. It's not like everything has been put on hold. The staff are working together. They've been doing it a little bit with one hand tied behind their back because the agency staff are not allowed during the shutdown to look at their emails or respond to inquiries from the Hill on legislation. Jared Seberg of TD Cowan noted that the return of agency staff is critical for getting a final bill together. He wrote on Monday, it would also be tough to advance a bill that the SEC and CFTC staff have not reviewed.

It would allow opponents to demand a delay until the agency reviews are complete. The end of the shutdown is also a macro event that could have some powerful implications. During the shutdown, the Treasury stopped spending money, but bond issuance continued as normal. That meant a large buildup in the Treasury General account, which now stands at around $950 billion, a four-year high. Building up cash in the TGA removed it from financial markets and negatively impacted liquidity conditions. With the government back to spending from this week, we should see liquidity conditions ease. The shutdown also meant that government jobs and inflation data wasn't released for October. White House spokesperson Caroline Levitt said on Wednesday that the data will,

quote, likely never be released. She claimed this would mean the Fed would be, quote, flying blind at a critical period. Now, while many are calling for a huge wave of liquidity to be released from the TGA and drive assets higher, analyst Noel Atchison isn't so sure. She pointed out that the TGA is only around $140 billion over the Treasury's target, so it isn't likely to be a huge injection of liquidity. She wrote, a reopening will be good for market liquidity, which had been tightening in recent weeks, but not enough to change the uncertainty dynamic beyond an initial bounce. Concerns about AI valuations are gaining momentum. A Supreme Court verdict against the administration on tariffs would throw a whole toolbox of wrenches into

analyst projections, and talk of nuclear testing is terrifying. So an end to the government shutdown would be very good news indeed, but not necessarily for the number go-up reasons many seem to hope. Legacy internet and infrastructure are brittle, plagued by downtime, coverage gaps, and outdated financing models. Communities and builders are left behind while capital sits locked out. Althea is changing that. Since 2018, their technology has powered resilient, sustainable networks across the U.S. and abroad. With Althea L1, they built the world's first blockchain purpose-built for utilities and telecom, turning infrastructure into a transparent, investable asset class. Through liquid infrastructure, networks can now be financed in real time, operated more

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a definitive guide to which tokens are securities and non-securities. The taxonomy will be rooted in the Howie test, which defines an investment contract. However, Atkins added, cryptocurrencies might launch with a set of promises made to the investor, which make it an investment contract, but those don't necessarily. necessarily last forever. He said, networks mature, code is shipped, control disperses, the issuer's role diminishes or disappears. At some point, purchasers are no longer relying on the issuer's essential managerial efforts, and most tokens now trade without any reasonable expectation that a particular

team is still at the helm. During the speech, Atkins also took a hard line on enforcement stating, let me be clear about what this framework is not. It is not a promise of lax enforcement at the SEC. Fraud is fraud. This is a somewhat unusual tone from Atkins and could reflect that some enforcement against the worst excesses of the past year coming soon. Atkins touched on initiatives already in motion. Regarding these so-called super apps that host trading for multiple types of instruments, Atkins said, I have asked staff to prepare recommendations for the commission to consider

that would allow tokens tied to an investment contract to trade on non-SEC-regulated platforms, whether registered at the CFTC or through a state regulatory regime. In plain language, the SEC is preparing to allow stocks, derivatives, crypto, and commodities to trade on the modern exchange apps. Atkins also mentioned, I hope that the commission will also consider a package of exemptions to create a tailored offering regime for crypto assets that are part of or subject to an investment contract. Generalized exemptions would allow categories of products to come to market much faster.

One very clear example is the innovation exemption to allow tokenized assets to ignore normal SEC regulations. Having a clear framework for exemptions rather than providing them on an ad hoc basis would theoretically allow for a much more level playing field. Finally, Atkins emphasized that the framework is not supposed to preempt the market structure Bill. He said, what I envision aligns with legislation currently being considered by Congress and aims to complement, not replace Congress's critical work. Commissioner Purs and I have made it a priority to support congressional efforts, and we will continue to do so. The mood in crypto-legal

circles has been pretty positive about this new interpretation of Howie. Bill Hughes of consensus provided a lengthy analysis concluding, this is expected from Atkins and might come as a shock to some in crypto who think anything is fair game now. Howie stays, but we need to rent it in. Capital formation needs to be easier too, but we need to be careful as to how. Greta Reddig, the head of legal at Gito Labs, wrote, This one was a banger live. Network tokens are not securities and investment contracts can expire. Thank you, Chair Atkins, for providing a much-needed path forward before official staff

guidance on token taxonomy. Mike Dutas of Six-Man Ventures had a layman's interpretation, simply writing, bullish, clarity coming. For Congress, the market structure bill has managed to stay at the top of the agenda, and lawmakers can hit the ground running now that the shutdown is resolved. On Monday, Senators Booseman and Booker released a bipartisan discussion draft of the bill. These senators are leaders on the Agriculture Committee, so this version of the bill sticks largely to issues around digital commodities like Bitcoin and Ethereum, rather than getting into the nuances of a securities definition. It's intended to be paired with a draft out of the banking committee,

which could be a much more difficult process given Senator Elizabeth Warren's leadership role. The draft is still very preliminary, so we're not going to get too much into it at this stage, as it's still subject to a lot of change. It includes bracketed sections throughout that denote unresolved issues from the recent negotiations between the two leaders. Still progress is progress and a positive statement from Democrat Senator Cory Booker is a promising sign. He said, more Americans are engaging with novel financial markets and payment systems than ever before, and Congress must take steps to strengthen and expand regulatory frameworks to protect consumers from predatory practices, keep our markets safe, and prevent bad actors from exploiting regulatory

gaps. Booker added that more work was needed on the bill and flagged that the CFTC funding was a primary concern. The CFTC is expected to gain jurisdiction over crypto-spot markets under any formulation of a final bill, which will be the largest retail-focused market the agency has ever dealt with. The CFTC has about one quarter of the staff of the SEC, so there are legitimate questions about whether they'll be able to handle the new jurisdiction. The discussion draft includes fees to be gathered from unspecified crypto entities to fund expansion of the CFTC's budget. In addition, Booker said that he's concerned about, quote, preventing regulatory arbitrage as well as the ongoing corruption of public officials and whether Congress has created the correct

guardrails to prevent those misdeeds. Now, it's been unclear throughout this process whether Congress can actually limit the crypto activities of the president, although it's been a major sticking point for Dems. All in all, it seems like a reasonable draft that the industry and market participants can work with, with the biggest takeaway being that Democrats are now at the table. Lastly, today, while there's still hope for next year, this week's price action isn't filling anyone with confidence for a strong end of the year. Bitcoin has been more or less rangebound for most of the week. We haven't seen a serious run at breaking down below 100K, but rallies have also been anemic with a weekly high of 107,000 set on Monday night. Some analysts note that the tailwinds

are disappearing rapidly. Vincent Liu, the CIO at Kronos Research, commented, macro relief rally faded fast. Part of the deteriorating macro is a December Fed cut rapidly getting priced out. On Wednesday, Nick Timmeros of the Wall Street Journal reported that the FOMC is fracturing over the decision point. Four voting Fed presidents have now either said their comfortable holding rate steady or stayed quiet on the topic during speeches this week, which is almost enough to block a rate cut by themselves. Timmeros reported three major points of disagreement between the hawks and the doves, whether tariff inflation will truly be a one-off, whether their weak hiring is just about a lack of migration rather than a weak labor market, and whether

rates are still restrictive. Rate cut odds for December have been declining over the past week, but on Monday they still sat at 66%. Now the market is pricing in a 52% chance of a cut, basically even odds and rapidly declining. Whether that means an end to the bowl remains to be seen, but we will be keeping an eye on that in the days and weeks to come. For now, that's going to do it for today's breakdown. Appreciate you listening as always, and until next time, be safe and take care of each other.

Peace.