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 foundational framework for the digital asset economy, now faces a significant and potentially prolonged legislative delay. According to a recent analysis from global financial giant Citibank, the Crypto-Asset Market Structure Bill, known as the CLARITY Act, may not see passage until after 2026. This critical delay stems from intense negotiations over how to define and regulate decentralized finance (DeFi) protocols, a hurdle that experts warn could leave the multi-trillion dollar crypto industry in regulatory limbo for years.

Crypto Market Structure Bill Hits Major Legislative Snag

Citibank’s institutional research team delivered a sobering assessment of the bill’s timeline. While the CLARITY Act represents a key catalyst for establishing legal certainty, its progress is slowing dramatically. The bank’s report, cited by financial news outlet CoinDesk, indicates that although legislative sponsors aim for passage in the coming months, political and technical complexities make a delay until after the 2026 election cycle increasingly probable. This timeline has profound implications for businesses, investors, and developers operating within the United States. Consequently, the industry may face an extended period of regulatory ambiguity.

The DeFi Definition Dilemma: Core of the Controversy

Citibank identified the single largest obstacle to the crypto market structure bill’s advancement: crafting a legally sound definition for decentralized finance. Lawmakers and regulators are grappling with a fundamental question. At what precise point does a decentralized protocol, its underlying software, or its developers transition from being creators of open-source technology to becoming regulated financial service providers? This distinction is not merely academic; it carries immense legal and operational consequences. For instance, applying traditional broker-dealer rules to software code presents unprecedented challenges. Furthermore, the global and pseudonymous nature of many DeFi systems complicates jurisdictional enforcement.

Contrasting Views on Stablecoins and Regulatory Compromise

In contrast to the DeFi deadlock, the report highlights a more negotiable area: stablecoin regulation. Debates surrounding issuer requirements, reserve auditing, and the permissibility of rewards programs appear to have more room for bipartisan compromise. Several legislative proposals on stablecoins have already seen advanced committee discussions. This suggests a potential path for incremental progress, even if the broader crypto market structure bill stalls. However, experts caution that separating stablecoin rules from the larger market structure framework could create a fragmented regulatory landscape. Such fragmentation might hinder comprehensive oversight.

Historical Context and the Push for CLARITY

The CLARITY Act emerged from years of congressional hearings and industry advocacy following the rapid growth of cryptocurrency markets. Its primary objectives are clear:

Jurisdictional Clarity: Defining whether a digital asset is a security or a commodity.
Exchange Regulation: Establishing a formal registration pathway for crypto trading platforms.
Consumer Protection: Implementing standards for custody, disclosures, and market conduct.

Previously, regulatory authority has been contested between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). This jurisdictional tension has created uncertainty, which the bill seeks to resolve. Major financial institutions, including Citibank, have long argued that clear rules are essential for mainstream adoption and institutional investment. Therefore, any delay directly impacts capital allocation and strategic planning on Wall Street.

Implications of a Prolonged Legislative Delay

A delay past 2026 would have cascading effects across the financial and technological ecosystem. The United States risks ceding leadership in digital asset innovation to jurisdictions with clearer rules, such as the European Union with its MiCA framework or certain Asian financial hubs. Domestically, state-level regulations may continue to proliferate, creating a patchwork of conflicting requirements. For cryptocurrency businesses, this extended uncertainty complicates long-term investment, product development, and compliance budgeting. Moreover, consumers may remain exposed to risks that comprehensive federal legislation aims to mitigate.

Expert Analysis on the Path Forward

Legal scholars and policy analysts note that the DeFi challenge is a novel one for financial regulation. “Regulating decentralized protocols requires rethinking foundational concepts like the ‘intermediary,'” explains a fintech law professor from a major university. “The delay reflects the complexity of the task, not a lack of will.” Some experts suggest that a phased approach, where certain non-controversial elements of the crypto market structure bill advance independently, could be a viable strategy. Others believe the 2024 election outcomes will ultimately determine the bill’s fate, making the 2025-2026 session a critical but volatile window.

Conclusion

Citibank’s analysis underscores a pivotal moment for U.S. cryptocurrency policy. The CLARITY Act, or crypto market structure bill, is ensnared in the difficult process of defining the future of DeFi regulation. While stablecoin provisions may find compromise, the core issue of decentralized protocol oversight presents a substantial hurdle likely to push final passage beyond 2026. This delay leaves a crucial segment of the modern financial system in a state of prolonged uncertainty, affecting innovation, investment, and consumer protection. The coming months will reveal whether lawmakers can bridge the divide or if the industry must wait for a new political cycle for definitive rules.

FAQs

Q1: What is the CLARITY Act?
The Clarity Act is a proposed U.S. law formally named the Crypto-Asset Market Structure Bill. It aims to create a comprehensive regulatory framework for digital assets, clarifying which agencies have authority and setting rules for exchanges and token offerings.

Q2: Why is defining DeFi causing such a major delay?
DeFi protocols operate without a central intermediary, using smart contracts and decentralized networks. Regulators struggle to determine who is legally responsible for compliance—software developers, token holders, or the protocol itself—making traditional regulatory models difficult to apply.

Q3: How does the delay impact cryptocurrency investors and companies?
Continued uncertainty means businesses face difficulty planning and investing for the long term. Investors may encounter inconsistent protections across states, and the U.S. risks losing innovative companies to regions with clearer regulations.

Q4: Could parts of the bill pass separately before 2026?
Yes, it is possible. Stablecoin-specific legislation, which deals with digital currencies pegged to assets like the dollar, has seen more bipartisan support and could advance as a standalone measure before the broader market structure bill.

Q5: What are other countries doing while the U.S. debate continues?
The European Union implemented its Markets in Crypto-Assets (MiCA) regulation in 2024. Other jurisdictions, including the UK, Singapore, and the UAE, are also advancing their own crypto regulatory frameworks, potentially attracting business and talent from the U.S. during its legislative delay.