Government shutdowns can delay ETFs, but not blockchain

Last week, the crypto industry witnessed two groundbreaking events that impacted the future of crypto ETFs. The SEC told issuers to pull their 19b-4 filings. Far from a setback, this was actually an encouraging sign, as it suggests regulators are actively working with issuers to refine proposals and clear a path for mainstream access to crypto ETFs. But only two days later, the government shut down. This move immediately stalled momentum by pausing reviews and delaying key decisions.

Government shutdowns reveal how dependent markets are on centralized processes. But they also invite reflection on how technology, including blockchain-based models, can complement regulatory structures to keep markets moving transparently and securely, even when other parts of the system are on pause.

Crypto ETFs and the limits of centralized access

There’s no question that ETFs are widely popular. PwC estimates global ETF assets under management grew by a record 27% in 2024, reaching $14.6T by the end of the year, with rapid further growth expected. Regulatory oversight ensures that ETF investors understand what they own and how it works, essential safeguards for market trust.

Major financial institutions such as BlackRock, with its IBIT ETF, and VanEck, with its Ethereum ETF, are helping to validate the space and drive wider acceptance. The SEC’s recent move to have issuers withdraw their 19b-4 filings may actually encourage more crypto ETFs to surface, as it signals fewer regulatory obstacles ahead. 

For instance, Canary’s Litecoin ETF is on the cusp of getting approved; however, the government shutdown will delay its launch. Still, even as the SEC relaxes certain requirements, the shutdown highlights a tragic flaw of the regulation process — centralization comes with dependency.

What permissionless systems show us 

While crypto can be daunting to many who feel it’s the Wild West of investing, the truth is that blockchain-based transactions have never had a trust issue. Onchain transactions are transparent, auditable, and tamper-proof. 

Blockchain-based systems operate continuously, 24/7, without holidays, shutdowns, or administrative delays. Transactions settle in real time, and all records are publicly verifiable, auditable, and immutable. This resilience doesn’t eliminate the need for oversight, but it demonstrates that financial systems can function transparently and efficiently without being tethered to centralized gatekeepers.

For example, stablecoins and decentralized exchanges enable users to trade assets 24/7 without relying on a bank or clearinghouse, while smart contract–based lending platforms like Aave or Compound manage loans, interest, and collateral automatically in a trustless and enforceable way. These systems operate continuously and transparently, regardless of operational or regulatory interruptions in traditional finance.

Another clear example is onchain indexing. Unlike traditional ETFs, which rely on custodians and centralized approvals, onchain indices automatically track baskets of crypto assets according to predefined rules, with all activity recorded on the blockchain. 

Investors can gain instant exposure to a diversified portfolio, whether a tokenized S&P 500-style basket or a sector-specific crypto index, without waiting for trading windows or intermediaries to process transactions.

A balanced path forward 

The crypto community’s embrace of regulated products like crypto ETFs demonstrates a willingness to meet traditional finance in the middle. Crypto ETFs act as a bridge between permissionless innovation and institutional structure, making it easier for a broader set of investors to participate in the ecosystem through familiar channels.

But progress must be balanced. Regulatory acceleration alone cannot guarantee resilience. True market maturity will depend on whether ETFs and related products can uphold the same transparency, auditability, and trust that blockchain-based systems already provide. 

The SEC has a unique opportunity to craft frameworks that both protect investors and incorporate the technological strengths of decentralized systems, creating a hybrid model that leverages the best of both worlds.

Recent SEC actions mark an inflection point for both ETFs and crypto investing. The permissionless and regulated worlds are no longer separate; they’re intersecting. The question is whether this convergence will expose the fragility of centralized systems or inspire regulators to adopt the same standards of transparency and resilience that define onchain finance.

If the latter happens, ETFs and blockchain-based models could coexist in harmony, elevating market integrity and investor confidence across the board. The future of diversification investing isn’t about choosing one system over the other, but ensuring both uphold the same high standard of trust.