Citi says the CLARITY Act remains the single most important push to bring legal certainty to U.S. crypto markets — but negotiators are still wrestling with the bill’s sharpest edges, and one of those fights could slow or reshape the legislation. Why it matters - The CLARITY Act is aimed at defining who regulates digital assets in the U.S., how tokens are classified, and which activities fall under securities versus commodities law. Supporters argue clear rules would unlock institutional adoption, reduce regulatory overlap and bring crypto businesses back to the U.S. after years of enforcement-driven exits. Critics worry that heavy-handed language could suffocate decentralized innovation. Where things stand - Citi analysts led by Peter Christiansen, in a Friday report, note momentum is building: the Senate Agriculture Committee has advanced its version of the bill. But the Banking Committee still controls the most contentious provisions, so timelines remain uncertain. Lawmakers are expected to keep negotiating even amid the possibility of a government shutdown, and target dates in the coming months are still attainable. That said, Citi warns the risk is rising that disagreements could push final passage beyond 2026. The DeFi flashpoint - The analysts identify decentralized finance (DeFi) as the biggest obstacle. Central questions center on when decentralized protocols, software and developers should be treated as regulated service providers. If the definitions are too restrictive, Citi says the framework could choke Web3 development and negatively affect decentralized exchanges, derivatives, stablecoin yield products and layer-2 networks. Any likely compromise, they add, may focus more on custody and monitoring requirements than on preserving pure software neutrality. Stablecoins and tokenized equities - On stablecoins, Citi sees room for compromise on reward structures — for example, limited-time yields or alternative incentives — even as banks warn about regulatory arbitrage and crypto firms insist rewards drive adoption. Importantly, Citi says these debates do not change its longer-term view that cross-border and business-to-business stablecoin use cases remain viable. - Tokenized equities face pushback over fears they could bypass traditional market infrastructure. Citi outlines possible middle paths: explicitly classifying tokens as securities, keeping distribution within existing market rails, using hybrid settlement models, or launching an SEC pilot program. Those options could allow innovation without upending the current securities value chain. Market and industry context - Separately, HSBC said earlier this week that Coinbase’s decision to withdraw support for U.S. market structure legislation is unlikely to derail the process. The bank suggested Coinbase CEO Brian Armstrong — who has said he’d rather have no bill than a bad bill — would probably accept a reasonable compromise. Bottom line - Citi regards the CLARITY Act as the essential catalyst for legitimizing digital assets in the U.S., but key philosophical fights — led by DeFi definitions, stablecoin rules and tokenized equities — could delay or reshape the bill. Watch the Banking Committee and ongoing negotiations: solutions are possible, but a clear path to final passage is not guaranteed this year. Read more AI-generated news on: undefined/news