Citi ( C ) said the CLARITY Act remains the main catalyst for digital asset authentication in the United States, but progress is being slowed by negotiations over the most contentious provisions.
While the Senate Agriculture Committee has advanced its version of the bill, Bank noted that the Banking Committee is still vetting the toughest issues, leaving timelines uncertain.
Lawmakers are expected to keep working even under a potential shutdown, with target dates in the coming months still achievable, although there is an increasing risk that negotiations will delay final passage beyond 2026.
“We see the passage of the CLARITY Act as the essential catalyst to promote/legitimize digital assets,” analysts led by Peter Christiansen said in the Friday report.
The crypto market structure legislation aims to define who regulates digital assets in the United States, how tokens are classified, and what activities fall under securities or commodities law. The framework is critical to providing crypto firms and investors with legal clarity, reducing regulatory overlap and bringing activity back to the country after years of enforcement-driven oversight drove companies overseas.
The bill’s supporters argue that clear rules will unlock institutional adoption, encourage innovation and limit offshore risks, while critics warn that poorly drawn lines could stifle decentralized technologies.
The analysts singled out definitions of decentralized finance (DeFi) as the biggest hurdle, with the debate focused on defining the point at which decentralized protocols, software and developers become regulated service providers.
An overly restrictive framework could weigh on Web3 development, decentralized exchanges, derivatives, stablecoin dividends and layer-2 networks, with any compromise likely to hinge on parental control and monitoring rather than pure software neutrality, the analysts said.
The analysts also said they see more opportunities to compromise stablecoin rewards, suggesting options such as time-limited returns or alternative incentive structures, even as banks warn of regulatory arbitrage and crypto firms argue that rewards are key to adoption. Citi said the issue does not undermine its long-term view of cross-border and business-to-business stablecoin use.
Regarding tokenized stocks, the report said fears of bypassing traditional market infrastructure have driven resistance, but potential solutions include clearly classifying tokens as securities, keeping distribution within existing rails, using hybrid settlement models or launching an SEC pilot. Such approaches could support innovation without raising the value chain for securities, the report added.
Coinbase’s ( COIN ) decision to end support for U.S. market structure legislation will not derail the process, investment bank HSBC said in a report earlier this week, suggesting that while the exchange’s CEO, Brian Armstrong, prefers no bill to a bad bill, he is likely to accept a sensible compromise.
Read more: Coinbase opposition won’t hinder US crypto market’s structural bill, HSBC says
