Chris Brummer, a professor at Georgetown Law, told the outlet that the halt in federal spending is throwing a wrench in dealmaking and fundraising, slowing oversight and putting U.S.’s position as a fintech superpower in jeopardy.
The partial closure of the Securities and Exchanges Commission means that the IPO market is currently the most impacted, as the thousands of employees furloughed are unable to review corporate registration documents and applications.
Companies such as Uber, Airbnb and Lyft eyeing imminent IPOs will likely experience delays, but smaller players such as fintech startups looking for “mini-IPOs” through Regulation A+ as well as crypto startups planning ICOs (initial coin offerings) are also out of luck, explains Finextra.
Online lending is also threatened due to diminished capacity at the SEC, which needs agency permission for loan repackages and resales on the open market, according to Brummer. He notes the irony that alternative lending might have been a salve to cash-strapped federal employees.
Additionally online platforms applying to be licensed as registered broker/dealers are indefinitely on hold, with robo-advisors and bitcoin-related exchange traded funds in a similar plight.
Brummer adds that the partial closure of the Commodity Futures Trading Commission puts fintech policy on ice, derailing a study on the Ethereum network and an advisory committee on cybersecurity and virtual currency policy.
"With other regimes in Europe, and even Asia, working actively to add clarity and stronger protections, a prolonged halt to government functions could spell trouble for America’s competitiveness in the sector."
Still operating as normal are entities connected to the Federal Reserve as well as the Financial Industry Regulatory Authority, which oversees crowdfunding.
Brummer finds not only the administrative backlog as a result of the shutdown to be worrisome, but also the long-term impact on the U.S.’s reputation in the international fintech space.
"With other regimes in Europe, and even Asia, working actively to add clarity and stronger protections, a prolonged halt to government functions could spell trouble for America’s competitiveness in the sector," Brummer told Finextra.