Traders on Polymarket now estimate a 78% chance of a US government shutdown by January 31, significantly increasing as the deadline nears. 

Political tensions are intensifying, with Senate Minority Leader Chuck Schumer declaring that Senate Democrats will block a spending bill over Department of Homeland Security (DHS) funding. 

This growing uncertainty is also delaying progress on the CLARITY Act, a key bill aimed at creating a regulatory framework for digital assets, with major crypto industry leaders withdrawing support due to concerns about its provisions.

Political Tensions Heighten Shutdown Risks

The growing likelihood of a government shutdown stems from a continued stalemate in Congress over funding bills. The chances of a shutdown have surged by 50% in just 24 hours, according to decentralized traders. 

The key issue causing the deadlock is the funding for the DHS, which has become a point of contention. Schumer’s opposition to the bill unless DHS reforms are made reflects deep divisions over how immigration enforcement is handled, especially after the recent federal law enforcement operation in Minneapolis led to public outrage.

With the January 30 funding deadline approaching, the situation is precarious. On the other hand, former President Donald Trump also acknowledged the possibility of another shutdown during an interview, further fueling concerns among citizens and policymakers.

Crypto Industry Leaders Express Concerns Over CLARITY Act

The delays in government funding are coinciding with the ongoing discussions about the CLARITY Act, which has been a priority for the crypto industry. However, the uncertainty surrounding the bill has led some prominent figures in the crypto sector to withdraw their support. 

Coinbase CEO Brian Armstrong, for instance, expressed his discontent with the current draft of the bill, stating that it would worsen the existing regulatory framework. He argued that the crypto industry would be better off without the bill than with a version that fails to address critical issues.

Uncertainty Threatens CLARITY Act’s Future

Alex Thorn, head of research at Galaxy Digital, also voiced concerns regarding the bill’s potential impact on stablecoin yields, which some US banking lobbyists argue could harm banks’ competitiveness. 

Thorn highlighted the lack of progress in finding a compromise and expressed doubts about the bill’s chances unless both sides can collaborate more effectively. He further suggested that the additional weeks of negotiation before a second markup could be crucial for finding common ground on stablecoin issues.

As the January 31 deadline approaches, the risk of a government shutdown looms large, with political tensions over DHS funding exacerbating the situation. At the same time, the future of the CLARITY Act remains uncertain, as prominent crypto industry leaders express dissatisfaction with its provisions. The delay in the bill’s progress is causing concern within the crypto community, which is hoping for a better draft that will address its needs without stifling innovation.

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