Cardano founder Charles Hoskinson has sharply criticized the CLARITY Act, describing the proposed United States crypto market structure legislation as deeply flawed. He warned that the bill would treat most new digital assets as securities by default and grant the Securities and Exchange Commission sweeping authority that could hinder the industry for years.
His remarks highlight an increasing divide within the crypto sector as lawmakers attempt to finalize regulatory rules ahead of the upcoming midterm election cycle.
Concerns Over Security by Default Framework
During a March 3 broadcast on YouTube, Hoskinson delivered a detailed critique of H.R. 3633, formally known as the Digital Asset Market Clarity Act of 2025. He argued that the proposal creates what he sees as a regulatory trap by automatically categorizing newly launched tokens as investment contract assets under SEC oversight.
According to Hoskinson, this framework would have applied to projects such as XRP and Ethereum at their inception and would similarly affect any future blockchain protocol launched in the United States. He contended that transitioning from security status to classification as a digital commodity under the Commodity Futures Trading Commission would involve complex and potentially prohibitive regulatory hurdles.
Hoskinson identified several areas where, in his view, the SEC could use its rulemaking authority to keep projects classified as securities indefinitely. These include subjective measures of decentralization and value attribution standards that he believes would be difficult to satisfy. He argued that the bill does not adequately reflect the current realities of the crypto industry.
Although established networks like Cardano and XRP might receive exemptions under transitional provisions, Hoskinson warned that future American crypto startups could be forced to launch abroad to avoid regulatory uncertainty, which he said would damage domestic innovation.
Industry Divisions and Legislative Gridlock
The CLARITY Act passed the House of Representatives in 2025 but has stalled in the Senate. A March 1 deadline set by the White House for stakeholders to resolve differences expired without a publicly announced agreement.
While Hoskinson’s objections focus on structural elements of the bill, he noted that one of the primary sticking points in Washington involves stablecoin reward mechanisms. Banking industry representatives have argued that certain provisions could encourage deposit outflows from traditional financial institutions.
The debate has exposed divisions within the crypto industry. Ripple chief executive Brad Garlinghouse has expressed optimism about the bill’s prospects and argued that regulatory clarity is preferable to continued uncertainty. Ripple chief technology officer David Schwartz also suggested that imperfect legislation may still be better than having no framework at all.
Hoskinson disagreed with that perspective, asserting that poorly designed legislation could codify regulatory approaches he believes were harmful to the industry under former SEC Chair Gary Gensler.
