Citi emphasized the importance of the CLARITY Act and how it garnered the necessary legislative momentum, while also acknowledging its fragility and the volatility of the issues it addresses. It also highlighted the importance and ongoing debate surrounding the DeFi world and stablecoin returns.
The Senate Agriculture Committee approved the bill on January 29 in a partisan vote, with a very close result that clearly demonstrates the division within the chamber. The outcome marked a formal step forward in the legislative process, but underscored the lack of broad political consensus, a key factor for the initiative to move smoothly through the next stages.
Despite this progress, market expectations have tempered. Prediction markets reflected a decline in the likelihood of passage, with Polymarket estimating around a 61% chance that the bill will be approved before the end of 2026, down from nearly 80% at the beginning of January, indicating increased uncertainty.
Divisions within the industry itself also influenced the legislative climate. Coinbase withdrew its support in mid-January 2026, disagreeing with the provisions related to stablecoin yields. This decision fragmented industry backers and contributed to the postponement of the Senate Banking Committee’s amendment session, which was originally scheduled for mid-January.
According to a Citi report, the vote in the Agriculture Committee represents a tangible step toward creating a legal framework that would grant the CFTC authority over digital commodities, while tokens considered securities would fall under the SEC’s oversight. However, the bank cautioned that key elements remain unresolved and that, although lawmakers are targeting spring 2026 for further progress, the partisan nature of the vote and ongoing negotiations could further delay the process.
DeFi disputes and industry fractures
According to Citi, the main obstacle is how the bill defines DeFi and when protocols, software, and developers should fall under regulatory obligations. According to Citi and other groups, this is where the biggest hurdles to formalizing regulation lie.
Meanwhile, opponents warn that mandatory AML/KYC and restrictions on permissionless interaction could effectively shut down many decentralized protocols, undermining stablecoin liquidity, derivatives, and yield products.
Market indicators reflected the heightened uncertainty. Polymarket showed the probability of the CLARITY Act becoming law by the end of 2026 at around 61%, down from approximately 80% in early January—a shift Citi highlighted as significant for institutional timelines.
Citi assessed that the bill’s passage would be broadly neutral for markets in the long run but said initial volatility was likely as participants assess the regulatory outcomes. Matt Hougan, CIO of Bitwise, cautioned that the lack of clear rules could push the sector into a “three-year trial period” before substantial momentum returns—a scenario Citi noted as a downside risk to institutional adoption.
Negotiations remained active, with participants such as HSBC suggesting that Coinbase’s opposition would not derail the entire project, while the White House arranged a meeting between banking and crypto executives scheduled for 2026-02-02 to try to reconcile the dispute over stablecoin yields.
