- Kevin McCarthy was removed from his position as Speaker of the House.
- Crypto-friendly Republican Patrick McHenry was installed as interim Speaker.
- Questions over government funding persist and crypto might lose an important ally.
The crypto-friendly Republican Patrick McHenry just assumed the role of the most senior Republican in the House after Kevin McCarthy was removed from his position on Tuesday.
Many questions are yet to be answered, including who will be the next Speaker of the House and will the US government avoid a shutdown after November 17 — when Saturday’s temporary funding deal runs out.
Both lingering questions could have an impact on crypto.
Crypto allies in DC are hard to come by, McHenry is one of the few crypto-friendly lawmakers. Last week he threatened to issue a subpoena to US Securities Exchange Commission chair Gary Gensler over his interactions with collapsed crypto exchange FTX.
McHenry also serves as chair of the Financial Services Committee, which could change following Tuesday’s events.
“If Patrick McHenry gets pressed into service as Speaker, he’d give up his Chair of the FinServ committee,” said Sean Tuffy, a regulation expert and former Citigroup executive. “This would take a pro-crypto guy off the board, which could impact the attempts to get a crypto bill out the door.”
Tom Emmer, another crypto ally, has been touted as McCarthy’s full-time successor. Although Emmer has said as recently as last week that he has no interest in the role.
Market hangover
The narrowly missed shutdown would have posed a threat to crypto markets too.
The government shutdown may contribute to volatility in the very short term, Coinbase’s head of institutional research David Duong said in a report on Friday.
“Although contagion from traditional risk assets may affect crypto due to the knee-jerk reaction from market players, we believe that that anxiety could be short-lived,” Duong said. He added that digital assets like Bitcoin should “recover quickly as they tend to work well as a hedge against the points of failure inherent in the traditional financial system.”
These questions might have gone for now, but will hang over markets as the next deadline approaches in 44 days.
Importantly the deal on Saturday means the US Federal Reserve won’t be impacted. A shutdown would have limited the central bank’s access to key pieces of data, like the September inflation report, Duong said.
While this was avoided, headwinds persist. The Fed could keep hiking rates at the next meeting on November 1. This would set up for a rally through year-end, Coinbase said. CME’s FedWatch tool is showing a 20% probability of a hike on November first.
Historic vote
For the first time ever a vote passed to remove a sitting Speaker of the House. McCarthy held the role since January 7, making him the third shortest-serving Speaker ever. In the meantime, the clock is ticking on government funding once again.
McCarthy pushed through a bill to avoid a shutdown in the eleventh hour on Saturday, much to the chagrin of his colleagues — most notably a far-right group of House Republicans.
The motion to vacate was brought by Republican Matt Gaetz, who demanded McCarthy disclose the details of the deal he struck with Joe Biden’s White House to bring forward legislation to provide funds for the war in Ukraine.
Adam Morgan McCarthy is DL News’ London-based Markets Correspondent. Got a tip? Reach out at adam@dlnews.com.
