Citi says CLARITY Act momentum builds, but DeFi fight could stall crypto bill

Policy Share Share this article Copy link X icon X (Twitter) LinkedIn Facebook Email Citi says CLARITY Act momentum builds, but DeFi fight could stall crypto bill Washington is edging closer to a landmark crypto framework, though disputes over DeFi and stablecoin rewards risk pushing final passage beyond 2026. By Will Canny , AI Boost | Edited by Sheldon Reback Jan 30, 2026, 3:02 p.m. Make us preferred on Google Citi says CLARITY Act momentum builds, but DeFi fight could stall crypto bill. (CoinDesk) What to know : Citi said the CLARITY Act remains the central legitimizing force for U.S. digital assets, with lawmakers eyeing spring milestones but rising risk of delays. DeFi definitions are the hardest fight, while stablecoin rewards offer the clearest path to compromise. The bank said tokenized equities could move forward through hybrids, pilots or tighter securities labeling. Citi (C) said the CLARITY Act remains the key catalyst for legitimizing digital assets in the U.S., 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 the Banking Committee still controls the toughest issues, leaving timelines uncertain. STORY CONTINUES BELOW Don't miss another story. Subscribe to the State of Crypto Newsletter today . See all newsletters Sign me up By signing up, you will receive emails about CoinDesk products and you agree to our terms & conditions and privacy policy . Lawmakers are expected to keep working even during a potential shutdown, with target dates in the coming months still attainable, though there is a rising risk that talks delay final passage beyond 2026. "We see the passage of the CLARITY Act as the essential catalyst for advancing/legitimizing digital assets," analysts led by Peter Christiansen said in the Friday report. Crypto market structure legislation aims to define who regulates digital assets in the U.S., how tokens are classified and which activities fall under securities or commodities law. The framework is critical to giving crypto firms and investors legal clarity, reducing regulatory overlap and bringing activity back into the country after years of enforcement-driven oversight drove companies abroad. The bill's supporters 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. The analysts flagged decentralized finance (DeFi) definitions 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 weigh on Web3 development, decentralized exchanges, derivatives, stablecoin yield and layer-2 networks, with any compromise likely to hinge on custody and surveillance rather than pure software neutrality, the analysts said. The analysts also said they see more scope for compromise on stablecoin rewards, suggesting options such as time-limited yield or alternative incentive structures, even as banks warn of regulatory arbitrage and crypto firms argue rewards are key to adoption. Citi said the issue does not undermine its longer-term view on cross-border and business-to-business stablecoin use. On tokenized equities, the report said fears of bypassing traditional market infrastructure have driven resistance, but potential workarounds 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 upending the securities value chain, the report added. Coinbase's (COIN) decision to end support for U.S. market structure legislation won't derail the process, investment bank HSBC said in a report earlier this week, suggesting that while the exchanges CEO, Brian Armstrong, prefers no bill over a bad bill, he would probably accept a sensible compromise. Read more: Coinbase opposition won't stymie U.S. crypto market structure bill, HSBC says Cryptocurrency Regulations Market Structure Legislation Citigroup AI Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards . For more information, see CoinDesk's full AI Policy .