Citi (C) said the CLARITY Act remains the key catalyst for legitimizing digital assets in the US, but progress is slowed by negotiations over its most contentious provisions.
While the Senate Agriculture Committee has advanced its version of the bill, the bank noted that the Banking Committee still controls the most difficult issues, leaving timelines uncertain.
Lawmakers are expected to continue working even during a possible shutdown, with target dates in the coming months still possible, although there is a growing risk that talks could delay final approval beyond 2026.
“We view the passage of the CLARITY Act as the essential catalyst to promote/legitimize digital assets,” analysts led by Peter Christiansen said in Friday’s report.
Crypto market structure legislation aims to define who regulates digital assets in the US, how tokens are classified, and what activities are governed by securities or commodities law. The framework is essential to provide legal clarity to crypto companies and investors, reduce regulatory overlap, and return activity to the country after years of enforcement-driven oversight that drove companies abroad.
Supporters of the bill argue that clear rules will unlock institutional adoption, encourage innovation and curb offshore risk, while critics warn that poorly drawn lines could stifle decentralized technologies.
Analysts pointed to definitions of decentralized finance (DeFi) as the biggest hurdle, with debate focused on defining the point at which decentralized protocols, software and developers become regulated service providers.
An overly restrictive framework could impact the development of Web3, decentralized exchanges, derivatives, the performance of stablecoins and Layer 2 networks, and any compromises would likely rely on custody and surveillance rather than pure software neutrality, analysts said.
Analysts also said they see more room to reach agreement on stablecoin rewards, suggesting options such as limited-time returns or alternative incentive structures, even as banks warn of regulatory arbitrage and cryptocurrency companies argue that rewards are key to adoption. Citi said the issue does not undermine its long-term vision for cross-border and business-to-business use of stablecoins.
As for tokenized stocks, the report says fears of bypassing traditional market infrastructure have generated resistance, but possible solutions include clearly classifying tokens as securities, keeping distribution within existing rails, using hybrid settlement models, or launching an SEC pilot. These approaches could support innovation without disrupting the securities value chain, the report added.
Coinbase’s (COIN) decision to end support for US market structure legislation will not derail the process, investment bank HSBC said in a report earlier this week, suggesting that while exchanges CEO Brian Armstrong prefers no bill over a bad one, he would likely accept a sensible compromise.
Read more: Opposition to Coinbase will not hinder US crypto market structure bill, HSBC says
