Government Relations Insights: October 2, 2025

TOP LINES

The federal government has entered a shutdown after Congress failed to reach a funding agreement before the September 30 deadline. Most non-essential operations are suspended, while critical services—such as national security, air traffic control, and Social Security payments—continue. The shutdown is expected to disrupt federal agencies, delay services, and furlough hundreds of thousands of workers until lawmakers resolve the budget impasse. President Trump and Office of Management and Budget Director Russell Vought are meeting today, October 2, to determine cuts to federal agencies — which could take effect as soon as tonight or tomorrow.

If you have any questions regarding specific agencies or would like a more detailed summary of expected implications, please reach out. 

What We’re Reading

From CNBC: How stablecoins could change the way Americans shop in stores 

‍From  POLITICO Pro: Finance Committee wrestles over taxing cryptocurrencies 

WEEKLY UPDATE

Treasury Secretary Scott Bessent appointed Michael Friedman as Chief of Staff. Friedman previously served as Special Assistant to the President for Presidential Personnel and has a background in supply chain tech and e-commerce startups.

The Consumer Financial Protection Bureau (CFPB) has directed its enforcement attorneys and a small group of examiners to flag investigations involving potential “debanking” of customers based on religious or political affiliation. The move comes even as the agency’s broader fair lending and enforcement activities have largely slowed. According to an email obtained by Bloomberg Law, the review follows direction from President Trump’s August executive order directing federal banking regulators to curb what the administration characterizes as unlawful denial of banking services.

The Supreme Court has temporarily blocked President Trump’s attempt to remove Federal Reserve Governor Lisa Cook, allowing her to remain in office while it reviews the legal challenge. The Court has scheduled arguments for January 2026, putting on hold the question of whether the president has authority to dismiss a Fed governor “for cause,” a question with deep implications for the Fed’s institutional independence. 

The White House has formally withdrawn Brian Quintenz’s nomination to lead the Commodity Futures Trading Commission (CFTC), ending a contested confirmation fight. Brian Quintenz, a16z crypto’s global head of policy and a former CFTC commissioner, was nominated by President Trump in February to chair the agency as it readies for an expanded role in overseeing the crypto sector.

At the Securities and Exchange Commission (SEC)- Commodity Futures Trading Commission (CFTC) Roundtable on Regulatory Harmonization Efforts, commissioners underscored both the urgency and limits of coordination. Chairman Paul Atkins and Commissioner Mark Uyeda pressed for harmonization to end costly duplication that drives innovation offshore, Commissioner Hester Peirce emphasized clear and coordinated rules for crypto and other cross-market products, and Commissioner Caroline Crenshaw cautioned that any harmonization must remain anchored in investor protection and statutory missions. CFTC Acting Chair Caroline Pham declared the SEC–CFTC turf war over, highlighting a new era of collaboration to align rules, reduce costs, and support innovation especially in crypto. She also stressed that joint efforts like Project Crypto and the CFTC’s Crypto Sprint show how harmonization can modernize market structure and expand access without weakening resilience.

The SEC’s Division of Investment Management issued a no-action letter (the “NAL”) stating that it would not recommend enforcement action to the Commission against registered advisers or regulated funds for maintaining crypto assets and related cash and cash equivalents with certain state-chartered financial institutions (“State Trust Companies”). Commissioner Peirce released a statement welcoming the no-action letter confirming that state-chartered trust companies can serve as crypto custodians for advisers and funds, calling it long-overdue clarity that reduces harmful gray zones, supports investor protection, and opens the door to modernizing custody rules for tokenized and native crypto assets.

President Trump formally nominated Travis Hill to serve as the permanent chair of the Federal Deposit Insurance Corporation (FDC), where he’s been acting head since January.

The FDIC announced several senior leadership appointments: Ryan Billingsley as Director of Risk Management Supervision, overseeing bank safety and soundness; Matthew P. Reed as General Counsel, bringing deep fintech, AML, and Treasury experience; Alex LePore as Deputy to the Chairman for Policy; Mark L. Handzlik as Special Advisor to the Chairman, with a background in Basel III and Fed policy work; and Dan Marcotte as Ombudsman, formalizing a role he has held in an acting capacity since May.

The Federal Trade Commission (FTC)  sued Zillow and Redfin, alleging an unlawful $100 million agreement that eliminated Redfin as a competitor in the rental internet listing service market. According to the complaint, Redfin agreed to exit multifamily advertising, terminate customer contracts, and syndicate Zillow’s listings exclusively. The FTC says these actions violate federal antitrust law, raise prices for property managers, and reduce competition and innovation for renters.

The Financial Crimes Enforcement Network (FinCEN) postponed implementation of the Anti-Money Laundering Regulations for Residential Real Estate Transfers Rule until March 1, 2026, granting temporary exemptive relief to reduce compliance burdens while Geographic Targeting Orders remain in effect.

The National Credit Union Administration (NCUA) confirmed it will remain open during the government shutdown and that member accounts remain federally insured, while urging credit unions, especially those serving federal employees, to prepare contingency plans, offer flexible lending, and communicate assistance programs to affected members.

Governor Kathy Hochul announced that Superintendent Adrienne Harris will step down from the New York Department of Financial Services (DFS) after four years, during which she reshaped the agency into a national leader on consumer protection, digital asset oversight, and health equity. Kaitlin Asrow, currently Executive Deputy Superintendent for Research & Innovation and a former Federal Reserve fintech policy advisor, will become Acting Superintendent on October 18, 2025, with a mandate to continue DFS’s work on financial inclusion, responsible innovation, and digital asset regulation.

New York DFS issued updated guidance on virtual currency custody, emphasizing that beneficial ownership of assets must always remain with customers, even in insolvency. The guidance sets guardrails for sub-custodian agreements, clarifies permissible asset use, and reinforces disclosure and custody standards, superseding January 2023 guidance.

Ranking Member of the House Financial Services Committee Maxine Waters (D-CA) and Senate Banking Committee Ranking Member Elizabeth Warren (D-MA) urged Financial Services and Banking Committee Chairs French Hill (R-AR) and Tim Scott (R-SC) to call on HUD Secretary Scott Turner to testify following whistleblower allegations that the Trump Administration systematically gutted HUD’s fair housing and civil rights enforcement. The allegations include 70 percent staff cuts in the Office of Fair Housing, reassignment of most Violence Against Women Act staff, gag orders on HUD attorneys, and dropped housing discrimination cases, potentially leaving millions vulnerable to unchecked housing discrimination.

Sens. Josh Hawley (R-MO) and Senator Dick Durbin (D-IL) introduced the Aligning Incentives for Leadership, Excellence, and Advancement in Development (AI LEAD) Act. This legislation would classify AI systems as products, allowing for liability claims when an AI system causes harm. 

Sen. Ed Markey (D-MA), Ranking Member of the Senate Commerce Committee, criticized Senate Republicans for blocking a bipartisan one-year extension of the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, warning their lapse at midnight will cause layoffs, stall scientific progress, cut billions in investment, and hand U.S. innovation advantages to foreign adversaries.

California Governor Gavin Newsom signed SB 53, the Transparency in Frontier Artificial Intelligence Act, the first state law to set guardrails for frontier AI models. Authored by Senator Scott Wiener (D-CA), the law requires large AI developers to publicly disclose how they incorporate national and international standards into their frameworks, establishes CalCompute — a state-backed public computing consortium to support safe AI research, and creates reporting mechanisms for AI safety incidents. It also protects whistleblowers and directs the state to regularly update requirements as the technology evolves.

ICYMI

The Senate Finance Committee held a hearing yesterday to examine the taxation of digital assets. The FSV team covered the hearing here.Treasury Secretary Scott Bessent and Chancellor Rachel Reeves announced the Transatlantic Taskforce for Markets of the Future following a joint roundtable in London. Reporting through the UK-U.S. Financial Regulatory Working Group, the Taskforce will develop recommendations within 180 days on strengthening collaboration in capital markets and digital assets, reducing cross-border barriers for firms, and advancing long-term financial innovation. It will be co-chaired by HM Treasury and U.S. Treasury, with input from regulators and industry experts.

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