Charles Hoskinson, the founder of Cardano and the Midnight project, has voiced concern over the Digital Asset Market CLARITY Act currently under debate in the US. Hoskinson believes that, in its current form, the proposed legislation could offer a competitive edge to established cryptocurrencies while creating significant barriers for emerging projects. He also suggested that the implementation of the new rules—which are still far from being finalized—might take many years. Hoskinson, a prominent figure in the blockchain community and a co-founder of Ethereum, has long taken an active role in discussions around policy and innovation.
The CLARITY Act and its uncertain future
Lawmakers in the US Congress have been deliberating possible changes to the Digital Asset Market CLARITY Act. Despite some amendments, key issues such as the regulation of decentralized finance platforms remain unresolved. At this stage, the bill is not yet ready for a Senate vote, leaving its fate hanging in the balance. Hoskinson underscored that even if the legislation is passed, effective regulatory implementation could be delayed for as long as fifteen years.
According to Hoskinson, the political climate may have a major influence on the bill’s trajectory. He pointed out that a future Democratic or Republican administration could modify the legislation in ways that suit its own interests. This uncertainty means that the bill’s ultimate shape and effectiveness are highly dependent on the political developments to come.
He also highlighted how many of the latest US regulatory moves are a response to the high-profile collapse of the FTX exchange. The fallout from FTX, Hoskinson argued, especially shifted perspectives among Democrats, driving a more cautious and interventionist approach to cryptocurrency oversight in Washington.
Regulatory structure raises fears for new projects
Hoskinson expressed deep reservations over the proposed regulatory framework, warning that it would categorize nearly all new cryptocurrency initiatives as securities by default. He argued that this would create a near-impossible standard for novel projects wishing to avoid securities status, particularly given the lack of incentives for the Securities and Exchange Commission (SEC) to treat new entrants differently. In this environment, he predicted that only longstanding entities would thrive, while innovative newcomers may struggle to gain traction.
“Cardano is well-positioned; XRP and Ethereum will also have an advantage. However, future projects simply won’t be able to compete or reach the necessary liquidity thresholds,” he observed.
Hoskinson went on to note that current debates in the sector often revolve around less important details, such as stablecoin yields, instead of addressing the broader regulatory challenges the industry faces. He argued that this focus risks obscuring the underlying issues that could impact the future of the space.
Expanding his critique, Hoskinson described the legislation as both overly complex and technically inadequate. He pinpointed the lack of technical expertise among policymakers involved in the drafting process as a core weakness, suggesting that this deficiency undermines the effectiveness and clarity of any resulting frameworks.
The broader political polarization in the US, Hoskinson added, hinders meaningful bipartisan cooperation on crypto regulation. This environment, he suggested, makes it much harder for the industry to build the wide-ranging support necessary for practical and balanced solutions.
Hoskinson also warned that the current US regulatory approach risks isolating the country from global cryptocurrency markets. He stressed the need for the US to align more closely with legal frameworks being implemented in regions such as Europe, the Middle East, and Asia to maintain its global relevance in the sector.
