Analysts at Citi say the CLARITY Act remains the single most important legitimizing framework for U.S. digital assets, but an escalating dispute over how Decentralized Finance should be defined is now threatening to delay its final passage.
In a new research note led by analyst Peter Christiansen, Citi argues that lawmakers broadly agree on the need for regulatory clarity, yet remain deeply divided on where decentralized protocols end and regulated financial intermediaries begin.
Why DeFi Is the Core Legislative Sticking Point
According to Citi, defining DeFi has become the most complex and politically sensitive challenge within the bill. Legislators are struggling to agree on the precise point at which developers, front-end operators, or protocol contributors should be treated as regulated service providers rather than neutral software builders.
This ambiguity creates real risk for the bill’s timeline. While lawmakers are targeting potential passage milestones in spring 2026, Citi warns that unresolved DeFi language could push final enactment well beyond 2026, despite growing bipartisan momentum.
The concern is not theoretical. The way DeFi is defined will determine whether large segments of on-chain activity fall under federal oversight or remain outside traditional regulatory frameworks entirely.
Areas Where Compromise Looks More Likely
Citi notes that not all parts of the CLARITY Act face the same level of resistance. Stablecoin rewards are viewed as a more negotiable issue, with analysts pointing to potential compromises such as time-limited yields, capped incentives, or alternative reward structures that could satisfy both traditional banks and crypto-native firms.
Tokenized equities also appear closer to resolution. Citi highlights possible workarounds, including explicitly labeling tokenized shares as securities or using hybrid settlement models that preserve existing market infrastructure while still enabling on-chain innovation.
These narrower compromises contrast sharply with the DeFi debate, which cuts to the core of how blockchain systems are categorized under U.S. law.
Where the Bill Stands in Congress
There has been tangible progress. On January 29, 2026, the Senate Agriculture Committee advanced its portion of the broader market structure framework through the Digital Commodity Intermediaries Act, marking the first concrete Senate-level win for the CLARITY effort.
However, Citi points out that momentum stalls in the Senate Banking Committee, where disagreements persist over stablecoin interest provisions and DeFi definitions. The situation has been further complicated by intensifying industry lobbying, particularly after Coinbase withdrew its support for the bill in mid-January 2026. That decision was driven largely by proposed restrictions on stablecoin rewards that would directly impact its revenue model.
Why the CLARITY Act Still Matters
Despite these hurdles, Citi remains clear on the bill’s importance. The CLARITY Act is designed to draw firm jurisdictional lines between the Securities and Exchange Commission and the Commodity Futures Trading Commission, formally classify digital assets as either securities or digital commodities, and create a federal framework that brings crypto activity back onshore.
In Citi’s view, passage of the CLARITY Act is the critical catalyst for unlocking large-scale institutional participation and enterprise adoption of blockchain technology in the United States. The challenge now is whether lawmakers can resolve the DeFi question without derailing the entire framework.
