Regulatory Uncertainty Intensifies: Trump Pardon, Looming Shutdown and Consequences for the Crypto Sector

Political Turbulence Casts Shadow Over Crypto Optimism

The Bitcoin and crypto industry finds itself caught between regulatory hope and political uncertainty. While the Trump administration is considered crypto-friendly, recent developments highlight the fragility of this supposedly favorable position. The likelihood of another government shutdown, the controversial pardon of Binance founder Changpeng Zhao, and strategic shifts in the Trump-affiliated DeFi project World Liberty Financial paint a complex picture of the current landscape.

These events raise fundamental questions: How stable is the regulatory future of Bitcoin and cryptocurrencies really, when even under an apparently benevolent government, political blockades and institutional conflicts burden the market?

The Facts

The probability of a U.S. government shutdown by the end of January has risen to 79 percent on the decentralized prediction platform Polymarket—a dramatic increase from 69 percent within just 24 hours ^[3]. Over $5 million has already been wagered on this event. The trigger for this sharp increase was an announcement by Senate Minority Leader Chuck Schumer that his party would not support a budget package containing funds for the Department of Homeland Security ^[3]. President Donald Trump himself did not rule out a shutdown and spoke of it being "highly likely to lead to another Democrat shutdown" ^[3].

Meanwhile, Changpeng Zhao, founder of the world's largest crypto exchange Binance, has definitively ruled out a return to the helm of the company—despite receiving a presidential pardon from Donald Trump ^[2]. Zhao had pleaded guilty in November 2023 to neglecting anti-money laundering requirements, resulting in four months in prison and a ban from working at Binance ^[2]. While the pardon in October 2025 lifted all restrictions, Zhao told CNBC that after seven years at the top, he now views his forced departure as a "valuable opportunity for a fresh start" ^[2]. He now sees himself only as a passive shareholder, while under the leadership of Richard Teng and Yi He, the user base has grown to over 300 million with trading volume of $34 trillion ^[2].

Interestingly, Zhao also commented on the Bitcoin market cycle, predicting that the classic four-year cycle is no longer relevant. Instead, the market could experience a "supercycle," as the U.S. and other countries now adopt a more crypto-friendly stance ^[2].

Meanwhile, World Liberty Financial, the DeFi project with Trump involvement, executed a notable portfolio rotation: through the COW Protocol, 93.77 WBTC (Wrapped Bitcoin) were swapped for 2,868 ETH—a swap worth approximately $8.08 million ^[1]. Observers speculate this occurred against the backdrop of growing concerns about quantum computer threats, with Bitcoin considered more vulnerable than Ethereum due to technical characteristics and conservative developer culture ^[1]. The WLFI token itself is struggling with general market weakness and currently trades at $0.1611—approximately 5.79 percent below its value 24 hours earlier ^[1].

Analysis & Assessment

The convergence of these three seemingly independent events reveals a deeper truth about the current state of crypto regulation: despite political lip service, uncertainty remains the only constant. The high shutdown probability is particularly relevant as it threatens the expected passage of important crypto legislation such as the CLARITY Act. Leading industry representatives, including Coinbase CEO Brian Armstrong, have already withdrawn their support for this bill, indicating fundamental disagreements over regulatory details ^[3].

Zhao's pardon by Trump was initially interpreted as a sign of a crypto-friendly government. However, his demonstrative refusal to return to Binance can be understood as strategic distancing—possibly to avoid future regulatory complications. Historically, founders of major crypto companies have rarely voluntarily relinquished operational control. Zhao's decision suggests that even a pardon does not eliminate all legal and reputational risks associated with leading a globally operating crypto company under intense regulatory scrutiny.

World Liberty Financial's portfolio shift from Bitcoin to Ethereum is noteworthy for several reasons. First, it undermines the narrative coherence of a supposedly "Bitcoin-friendly" Trump administration when even the associated DeFi project reduces Bitcoin holdings. Second, if the quantum computer speculation is accurate, this points to a previously underestimated technical risk perception. Bitcoin investors should therefore closely monitor the development of quantum-resistant solutions, even though the immediate threat is assessed as low by most experts. The technical weakness of the WLFI token itself may reflect growing skepticism toward politically motivated crypto projects.

In the medium term, these developments could lead to increased volatility. A government shutdown would delay regulatory progress and perpetuate uncertainty—traditionally a burden for risk assets like Bitcoin. At the same time, continued institutional adoption, to which Zhao points with his supercycle thesis, could have a countervailing stabilizing effect. The interplay of these forces makes short-term forecasts particularly difficult.

Conclusion

• The drastically increased shutdown probability of 79 percent illustrates that political instability represents a significant risk to regulatory progress despite crypto-friendly rhetoric—investors should expect delayed legislative processes

• Changpeng Zhao's demonstrative distancing from Binance despite presidential pardon signals that regulatory risks for prominent crypto actors remain substantial even under favorable political conditions

• The Bitcoin-to-Ethereum shift at World Liberty Financial raises questions about Bitcoin's technological future-proofing and could indicate growing concerns about quantum computer threats

• The discrepancy between political crypto rhetoric and actual regulatory progress remains significant—market participants should focus less on announcements and more on concrete legislative successes

• Zhao's supercycle thesis could prove correct despite short-term political turbulence if institutional adoption continues to advance independent of regulatory delays