The ongoing U.S. government shutdown has ignited a political storm, with Democrats accusing Republicans of creating conditions that could trigger another major market collapse. Lawmakers warn that the shutdown has paralyzed key financial watchdogs, leaving American investors exposed during a period of extreme volatility in the cryptocurrency sector.
Representative Maxine Waters, the top Democrat on the House Financial Services Committee, issued a strongly worded statement marking the 21st day of the government shutdown — which she squarely blamed on Republicans. Waters argued that by freezing regulatory agencies, the Trump administration and congressional Republicans have increased systemic risks.
“These risks are only amplified as Trump and Republicans in Congress work to integrate crypto into the traditional financial system without first establishing the proper guardrails — increasing the likelihood of future crashes just like this one that could more rapidly spread to traditional finance,” Waters wrote.
The Trump White House has rejected the criticism, instead blaming Democrats for the ongoing government closure.
Waters’ warning follows the October 10 market meltdown, when cryptocurrencies and technology stocks plunged sharply after U.S. President Donald Trump threatened to impose 100% tariffs on Chinese imports and introduced new export controls. According to Waters, the selloff “left investors with billions of dollars in losses” as traders moved funds from digital assets into traditional safe havens such as U.S. Treasury bonds and gold.
Bitcoin fell by 14.6%, Ethereum dropped 21%, Dogecoin tumbled more than 50%, and the $TRUMP coin — a memecoin associated with Trump supporters — plummeted 63% at its lowest point.
Since taking office, Trump has advanced a series of pro-crypto policies, appointing officials to key financial regulatory positions who have pushed for rapid integration of digital assets into the financial system. Democrats have seized on this approach, accusing the president of conflicts of interest linked to his family’s business ties in the crypto sector.
“It’s open corruption,” the late U.S. Representative Gerry Connolly told DL News in May.
The White House has denied those claims. “President Trump’s assets are in a trust managed by his children. There are no conflicts of interest,” Anna Kelly, the deputy press secretary, told DL News in May.
Regulatory Freeze Deepens Risk
Waters said the risk of another crypto meltdown has been magnified by the shutdown’s impact on federal oversight bodies. Roughly 90% of the Securities and Exchange Commission’s (SEC) staff have been furloughed, suspending most enforcement operations.
She noted that the SEC and the Commodity Futures Trading Commission (CFTC) are “effectively shut down,” leaving the financial markets without active regulators. The SEC, Waters added, currently “lacks the resources and personnel to even respond to emergencies like this one.”
That absence of oversight, she warned, comes at a particularly dangerous moment.
The October 10 crash has already raised concerns of possible insider trading. Analysts identified a crypto wallet that transferred millions of dollars into the Hyperliquid decentralized exchange shortly before the selloff, taking a heavily leveraged short position on Bitcoin and Ethereum. The wallet reportedly profited more than $150 million as prices plunged.
“This very serious allegation demands a thorough investigation by Wall Street’s cops on the beat,” Waters said. “The SEC and CFTC should be working diligently to get to the bottom of the flash crash, determine whether any wrongdoing occurred, and hold criminals accountable if insider trading or market manipulation is found.”
But with key agencies frozen amid the shutdown, those investigations remain on hold. Waters warned that without regulators on the job, markets are “vulnerable to another disastrous meltdown.”
