Crypto Market Structure Bill Faces Critical Delay: Citibank Warns CLARITY Act May Stall Past 2026

WASHINGTON, D.C. — A pivotal piece of U.S. cryptocurrency legislation, hailed as a cornerstone for the industry’s future, now faces a significant and potentially lengthy postponement. According to a new analysis from global financial giant Citibank, the Crypto-Asset Market Structure bill, known as the CLARITY Act, is increasingly likely to be delayed until after 2026. This assessment, reported by CoinDesk, casts a shadow over the timeline for establishing comprehensive federal rules for digital assets. The bank identifies a fundamental and controversial question—how to define and regulate decentralized finance (DeFi)—as the primary obstacle stalling progress in Congress.

The CLARITY Act’s Crucial Role and Mounting Hurdles

Citibank’s report positions the CLARITY Act as a key catalyst for legalizing and structuring cryptocurrency markets in the United States. The legislation aims to resolve longstanding jurisdictional conflicts between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Furthermore, it seeks to create a clear regulatory pathway for trading platforms and digital asset issuers. However, negotiations over specific provisions have dramatically slowed its advance through the legislative process. While lawmakers initially targeted passage in the coming months, Citibank’s analysis suggests this goal is now unrealistic. The complexity of the issues, particularly surrounding decentralized protocols, requires extensive debate and careful drafting to avoid unintended consequences.

DeFi Definition: The Central Point of Contention

The most formidable challenge, according to Citibank, is crafting a legal definition for DeFi that satisfies both innovation and consumer protection mandates. The core debate revolves around a critical threshold: at what point do decentralized protocols, their underlying software, and their developers become regulated financial service providers? This question strikes at the heart of DeFi’s foundational principle of disintermediation. Regulators and lawmakers must grapple with applying traditional financial frameworks to code-based, non-custodial systems that often operate without a central entity. For instance, determining liability for a smart contract exploit or defining the “operator” of an automated liquidity pool presents novel legal puzzles. Consequently, this definitional hurdle is consuming substantial time in congressional committees and stakeholder discussions.

Contrasting Challenges: DeFi vs. Stablecoin Compromises

Citibank’s analysis draws a clear contrast between the stalled DeFi discussions and other contentious areas within the bill. Notably, the debate over stablecoin regulations, including provisions on issuer qualifications and reserve requirements, appears more tractable. Policymakers generally acknowledge the systemic importance of stablecoins following events like the TerraUSD collapse. While disagreements exist on details like state versus federal chartering, there is broader consensus on the need for a baseline regulatory framework. This area is seen as having more room for political compromise and incremental progress. The table below summarizes the key sticking points identified by Citibank:

The Ripple Effect of Legislative Delay

A delay extending past 2026 carries profound implications for multiple stakeholders in the digital asset ecosystem. For cryptocurrency businesses operating in the U.S., prolonged regulatory uncertainty may hinder investment, product development, and expansion plans. Many firms continue to operate under a patchwork of state regulations and evolving SEC enforcement actions. This environment makes long-term strategic planning exceptionally difficult. Meanwhile, other global financial hubs like the European Union, the United Kingdom, and Singapore are advancing their own comprehensive crypto regulatory regimes. A multi-year delay for the CLARITY Act could impact the United States’ competitive position in attracting blockchain innovation and talent. Investors and consumers also face extended periods without clear federal protections or defined rules of the road for emerging DeFi applications.

Expert Perspectives on the Path Forward

Financial policy analysts note that Citibank’s timeline aligns with the historical pace of complex financial legislation, especially during an election cycle and with a divided Congress. The need to educate lawmakers on highly technical subjects like blockchain architecture and smart contract functionality inherently slows the process. Some experts suggest a phased approach, where less contentious elements like stablecoin rules or anti-money laundering standards might advance separately. However, others argue that a holistic bill is necessary to avoid regulatory gaps. The ongoing delay underscores the immense difficulty of fitting innovative, borderless technology into existing national legal frameworks designed for a pre-digital age.

Conclusion

Citibank’s sobering assessment of the crypto market structure bill highlights a pivotal moment for U.S. cryptocurrency policy. The CLARITY Act’s potential delay past 2026, primarily due to the intractable challenge of defining DeFi, signals a longer road to comprehensive federal regulation. While stablecoin provisions may find compromise, the fundamental question of regulating decentralized systems remains unresolved. This extended timeline ensures that regulatory uncertainty will persist, influencing business strategies, investor decisions, and the broader evolution of the digital asset market in the United States for years to come. The nation’s approach to this legislation will significantly shape its role in the future of global finance.

FAQs

Q1: What is the CLARITY Act?
The Crypto-Asset Market Structure bill, or CLARITY Act, is proposed U.S. legislation designed to create a comprehensive federal regulatory framework for cryptocurrencies. It aims to clarify the roles of the SEC and CFTC, establish rules for trading platforms, and address the classification of digital assets.

Q2: Why is defining DeFi so difficult for this legislation?
DeFi (decentralized finance) operates through software protocols without central intermediaries, challenging traditional regulatory models that target specific entities or persons. Lawmakers must determine if and how to regulate the code, its developers, or its users, a novel legal question with no clear precedent.

Q3: How does the delay of this bill impact cryptocurrency companies?
Prolonged delay means continued regulatory uncertainty. Companies may face challenges with compliance planning, banking relationships, and launching new products, potentially stifling innovation and investment in the U.S. market.

Q4: Are other parts of the world moving faster on crypto regulation?
Yes. Jurisdictions like the European Union have already implemented the comprehensive Markets in Crypto-Assets (MiCA) regulation. The UK, Singapore, and Japan are also actively developing and enacting detailed regulatory frameworks for digital assets.

Q5: Could parts of the CLARITY Act pass separately before 2026?
It is possible. Some analysts suggest that less controversial elements, such as specific stablecoin regulations or clear anti-money laundering rules for crypto, could be passed as standalone bills or attached to other financial legislation to make incremental progress.