Galaxy Research raises red flag over Crypto Bill’s unresolved hurdles
Momentum around the long-debated CLARITY Act has picked up after lawmakers struck a fragile compromise on stablecoin rewards, but Galaxy Research is warning that the most difficult work may still be ahead. Despite renewed optimism, the bill remains entangled in a web of regulatory, political and technical disputes that could easily derail its path to becoming law.
Stablecoin rewards deal breaks a key deadlock
In March 2026, Senators Thom Tillis (R‑N.C.) and Angela Alsobrooks (D‑Md.) announced a “tentative deal” with the White House on one of the bill’s most divisive issues: rewards on stablecoin holdings offered by crypto platforms.
Traditional financial institutions have long argued that these yield-like products could siphon deposits away from banks and into digital asset exchanges, effectively turning stablecoin platforms into shadow banks with far lighter regulation. Their concern centered on systemic risk and unfair competition, not just on lost deposits.
The Tillis-Alsobrooks compromise is designed to ease those fears, reportedly by tightening oversight of how stablecoin rewards are structured and marketed, and by clarifying which entities can offer them and under what conditions. The White House, through crypto policy adviser Patrick Witt, hailed the bipartisan agreement as a “major milestone” and a necessary breakthrough to get the CLARITY Act moving after months of gridlock.
For supporters of the bill, resolving the stablecoin dispute removed one of the most visible political roadblocks. Yet, as Galaxy Digital’s head of research Alex Thorn points out, it was only one piece of a much larger puzzle.
Galaxy Research: stablecoins are only the beginning
According to Thorn, the public debate has focused disproportionately on stablecoin rewards because the issue is easy to understand and politically charged. But the CLARITY Act is far broader in scope, and many of its most consequential sections remain unsettled.
Among the unresolved flashpoints Thorn highlights:
– Regulation of decentralized finance (DeFi) – how to oversee protocols that lack a traditional corporate issuer or centralized operator.
– Legal protections for software developers – whether writing or publishing code could be treated as a regulated activity.
– The scope of the Securities and Exchange Commission’s (SEC) authority – particularly where the line is drawn between securities and commodities in the crypto space.
These are not minor technical tweaks. Decisions in these areas will shape what kinds of crypto businesses can legally operate in the country, where innovation will cluster, and whether developers feel safe launching new protocols without fear of retroactive enforcement.
A rapidly closing political window
Thorn stresses that even if lawmakers can find compromises on the remaining issues, time itself has become a critical opponent. For the CLARITY Act to stand a realistic chance of becoming law in 2026, it must move out of the Senate Banking Committee by the end of April and clear the full Senate by early May.
Missing those informal deadlines would push the debate deeper into an election cycle and a crowded legislative calendar, where controversial financial regulation is often pushed to the sidelines. Thorn argues that if the bill stalls in committee beyond April, the odds of it passing this year drop to “extremely low.”
That compressed timetable creates its own pressure: complex technical disagreements must be resolved in weeks, not months, forcing policymakers to choose between deeper deliberation and the risk of losing the bill altogether.
Why the CLARITY Act matters so much for crypto
At its core, the CLARITY Act is intended to bring order to a regulatory landscape that many in the industry describe as fragmented and unpredictable. It aims to set:
– Clear definitions for different classes of digital assets
– A framework for which agencies regulate which activities
– Rules for stablecoin issuance, custody and rewards
– Guardrails for DeFi and other emerging crypto use cases
Advocates argue that without such a framework, the sector will continue to operate under a patchwork of enforcement actions, guidance letters and conflicting interpretations. That uncertainty, they say, suppresses institutional participation, drives startups offshore and makes long‑term planning nearly impossible.
If enacted, the law could become the baseline rulebook that both traditional finance and crypto-native firms rely on, potentially unlocking new products-such as tokenized securities, on‑chain money markets and regulated stablecoin payment rails-at much larger scale.
DeFi: the thorniest unresolved issue
The section on decentralized finance is widely seen as one of the toughest outstanding challenges. Unlike centralized exchanges or stablecoin issuers, many DeFi protocols are governed by open-source code and dispersed communities, with no single entity clearly in charge.
Regulators are grappling with questions such as:
– Who is accountable when a DeFi protocol facilitates illegal activity or suffers a catastrophic exploit?
– Should front‑end operators, governance token holders or core developers be treated as “controllers” or “service providers”?
– How can anti‑money‑laundering and consumer protection rules be applied without eliminating the very features that make DeFi distinct?
Galaxy Research warns that if these questions are answered with overly broad liability or burdensome requirements, developers may simply relocate to friendlier jurisdictions or choose not to build at all. On the other hand, leaving DeFi almost entirely unregulated is politically untenable after several high‑profile hacks and frauds.
Developer protections and the code‑as‑speech debate
Another sensitive area is how the bill treats software developers. Civil liberties advocates insist that writing and publishing code must be protected as a form of speech, not automatically treated as a regulated financial activity.
The CLARITY Act is expected to address whether developers who do not operate or control a protocol can still be held responsible for its use. A narrow, carefully drafted safe harbor could encourage innovation while still allowing regulators to target bad actors who run unregistered platforms or intentionally facilitate illegal behavior.
Galaxy Research cautions that failing to carve out robust protections could have a chilling effect on open‑source development, pushing talented engineers to avoid financial applications altogether or to work in opaque, closed‑source environments.
SEC authority and the securities vs. commodities fault line
Perhaps the most politically charged dispute revolves around the SEC’s jurisdiction. For years, the agency has relied on broad interpretations of existing securities laws to bring enforcement actions against token issuers and trading platforms. Many in the industry argue this approach is inconsistent and lacks clear ex ante rules.
The CLARITY Act seeks to better define when a digital asset is treated as a security and when it is not, potentially shifting some oversight toward other agencies for assets that function more like commodities or payment instruments.
Galaxy Research notes that this is a delicate balancing act. Curbing the SEC’s reach too aggressively might alarm investor protection advocates and provoke resistance from key lawmakers. Leaving its powers untouched, however, would undercut one of the main reasons the bill exists in the first place: to replace regulation‑by‑enforcement with transparent, predictable rules.
Political calculus: bipartisan, but fragile
The stablecoin compromise demonstrated that a bipartisan path is possible. Republicans have largely emphasized competitiveness and innovation, while Democrats have focused on consumer protection and systemic risk. The CLARITY Act can advance only if both priorities are reflected in the final text.
Galaxy Research underscores that this coalition is inherently fragile. A single high‑profile scandal, a sharp market downturn or a partisan fight over unrelated financial issues could easily shift the political mood. With the calendar already tight, any delay could be fatal to the current iteration of the bill.
What’s at stake for the industry if the bill fails
If the CLARITY Act misses its narrow legislative window, the crypto sector is likely to remain in the same uncertain environment that has characterized recent years. Companies will continue to interpret overlapping rules from multiple agencies, while major enforcement cases set de facto policy in the absence of comprehensive legislation.
That scenario could have several consequences:
– Slower institutional adoption, as large firms avoid areas with unclear rules.
– Accelerated offshoring, with exchanges and projects relocating to jurisdictions with more stable regulatory frameworks.
– Ongoing fragmentation, where different U.S. states and international centers apply divergent standards.
Galaxy Research argues that, while the industry can survive under those conditions, the chance to position the country as a global hub for responsible digital asset innovation would be significantly diminished.
A narrow but critical path forward
With the stablecoin rewards dispute largely contained, lawmakers, regulators and industry stakeholders now face a compressed race to resolve the remaining contentious issues-DeFi oversight, developer protections and the boundaries of SEC authority-before the political clock runs out.
Galaxy Research’s warning is clear: the sense of progress around the CLARITY Act is justified, but potentially misleading. The compromise on one headline topic does not guarantee success. Unless the deeper structural questions are addressed in the coming weeks, the bill risks stalling just short of the finish line, leaving the crypto ecosystem in regulatory limbo for yet another cycle.