The U.S. government shutdown that began on January 31 has forced the Securities and Exchange Commission (SEC) to significantly reduce its operations, impacting the cryptocurrency sector. With Congress failing to finalize funding bills, the SEC is operating with limited staff, halting reviews for crypto exemptions and stalling innovation. Key divisions such as Corporation Finance and Trading and Markets have suspended non-essential work, leaving crypto projects in limbo. The shutdown has triggered a sharp market reaction, with Bitcoin falling nearly 7% to around $78,000 and Ethereum dipping below $3,000. Liquidations across exchanges have exceeded $1 billion, exacerbated by ETF outflows and regulatory uncertainty. The delay in SEC operations has frozen at least 16 spot ETF applications and paused broader guidance on digital assets, adding to the sector's volatility. Analysts remain cautiously optimistic, anticipating a quick resolution if partisan divides are bridged.