Cardano founder Charles Hoskinson calls on the crypto industry to take a close look at HR 3633, stating that the market structure project could lock future US token projects into the status of securities, rather than the regulatory clarity promised by its supporters. His criticism goes beyond the flow: Hoskinson says the bill, as written, could protect legacy networks while making it harder for new crypto projects to start and grow within the United States.
Cardano’s founder issues a dire warning
In a video posted on March 2, Cardano’s founder framed the dispute in part as a direct response to CEO Brad Garlinghouse’s assertion that the flawed bill still prevails, by no means. Hoskinson flatly denied this. “A bad account is better than an account,” he said. “You start with a principles approach. You don’t make everything a security by default, and you improve modern securities laws so that it’s not so bad.”
His main objection is that the Clarity Act first treats newly created digital assets as securities and then requires them to convince the SEC that they can “graduate” to commodity status once their networks are sufficiently decentralized. In Hoskinson’s reading, the framework would have acquired XRP, Cardano, and Ethereum at launch. The difference, he says, is that older networks may eventually be grandfathered in, while future projects face a regulatory maze from day one.
Hoskinson repeatedly returned to the same question: what in practice keeps the SEC from holding the token as a security indefinitely? “If it starts out as a security, what’s to keep them from holding it as a security forever?” he asked. “And are we really sure that we can trust the laws that have yet to be passed by people who haven’t yet been appointed by the agencies that have prosecuted and jailed everyone for the last four years?”
From there, he proposed a series of what he called “attack vectors” that a rival SEC could use in its rulemaking. One involved procedural delays surrounding the completeness of the proposal, where the agency could reset the clock with notices of deficiency. Another focused on the bill’s vague “overall control” treatment, which he said could allow regulators to interpret open source synchronization as evidence of centralized control.
He also argued that proving decentralization could become impossible if issuers are required to identify beneficial owners in pseudonymous wallet systems or rely on compliance categories that the SEC hasn’t even created.
The broad point was that a bill could be enforceable in law but punishable in its implementation. “The bad bill puts into law everything that Gary Gensler wanted to do for the industry,” Hoskinson said. “The bad bill would, through legislation, allow the SEC to arbitrarily and individually kill any new project in the United States. A bad project would expose all DeFi developers to personal liability.”
He also argued that the current political battle in Washington has nothing to do with the structure of the bill. According to Hoskinson, the real concern is sustainable yields, not developer protections, DeFi coverage or the SEC-CFTC split. That leaves the industry in a strange spot, he said: a bill that’s marketed as market structure reform but “doesn’t cover the basics of what’s happening in the industry right now.”
Hoskinson’s preferred alternative is a principles-based rewrite that would modernize the securities law itself, build blockchain-native disclosure rails, clearly protect developers and DeFi, and extend how much discretion regulators can exercise in subsequent rulemaking. Otherwise, he warned, the practical result could be simple: established networks will survive, while the next generation of US cryptographic projects will first build offshore and only years later try to enter the American market.
At press time, Cardano was trading at $0.2692.
Featured image from YouTube, chart from TradingView.com
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