Stablecoin Inflows Surge as Shutdown Risks Paralyze Crypto Policy

The U.S. government shutdown risk has surged to 66% on Polymarket, with investors and regulators bracing for potential disruptions to crypto markets and policymaking. As the September 30 deadline for passing a funding bill looms, political gridlock between Congress and the White House has stalled progress on critical crypto legislation and regulatory oversight. A shutdown would limit the operations of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), delaying key decisions on Bitcoin ETFs and market structure reforms [1].

Cryptocurrency markets have already reacted to the uncertainty, with Bitcoin and Ethereum experiencing sharp declines. Bitcoin fell from $104,000 to $96,522 within 24 hours, while Ethereum dropped nearly 10% to $3,511. The total crypto market cap lost over $140 billion as investors shifted to safer assets, including stablecoins [2]. Polymarket data indicates a 77% probability of a shutdown by year-end, with 63% odds by October 1, reflecting heightened market anxiety [3].

Regulatory delays could further complicate crypto policy advancements. The SEC and CFTC contingency plans suggest a skeletal staff would handle only essential functions during a shutdown, slowing rulemaking and enforcement. The Senate Banking Committee’s markup hearing for a market structure bill was postponed to late October, and the Senate Agriculture Committee has yet to publish its draft legislation. Industry leaders, including Jessica Martinez of the Blockchain Association, warn that a shutdown would “stall critical progress on crypto policy” [4].

Legislative efforts, such as the CLARITY Act, face additional hurdles. While the House has passed the bill, Senate negotiations remain unresolved. A prolonged shutdown could derail momentum for bipartisan crypto reforms, though experts note that last-minute resolutions have historically resolved similar crises [5]. The Federal Reserve’s recent decision to return crypto oversight to normal banking supervision has been overshadowed by shutdown concerns, with institutional investors reducing exposure to volatile assets [6].

Market behavior underscores the risk-off sentiment. Ethereum fell below $4,000 for the first time in nearly seven weeks, and XRP dropped 4.2% as ETF inflows waned. On-chain data shows increased stablecoin inflows, with platforms like GoldenMining reporting a 38% rise in new users seeking stable returns [7]. Analysts suggest that Bitcoin could serve as a haven during turmoil but caution that recovery depends on resolving the budget impasse. If a shutdown occurs, the market may experience prolonged volatility, though liquidity rebounds post-resolution could drive a rebound [8].

Sources:

[1] title1 (https://www.coindesk.com/news-analysis/2025/09/27/state-of-crypto-shutdown-watch)

[2] title2 (https://coincentral.com/government-shutdown-risks-delay-of-crypto-regulation-and-market-stability/)

[3] title4 (https://stocktwits.com/news-articles/markets/cryptocurrency/bitcoin-ethereum-slip-as-risks-of-us-shutdown-loom/chDk6pwR3Ep)

[5] title9 (https://beincrypto.com/us-shutdown-risk-at-66-crypto-faces-turbulence-as-deadline-nears/)

[7] title10 (https://muddyrivernews.com/business/ethereum-and-xrp-plummeted-due-to-the-us-government-shutdown-while-safe-haven-demand-drove-goldenmining-users-to-8700-in-profits/20250926071945/)

[8] title6 (https://finance.yahoo.com/news/us-shutdown-risk-66-crypto-080417535.html)