Charles Hoskinson slams the CLARITY Act as a “terrible” bill

Charles Hoskinson says the CLARITY Act creates a “security trap” for new cryptocurrency projects.

Cardano founder Charles Hoskinson has launched a scathing attack on the CLARITY Act, the flagship project of the US crypto market structure, calling it a “terrible bill” that would classify almost all digital assets as securities by default and give the “weaponized” Securities and Exchange Commission (SEC) the power to suppress the industry for years.

His comments deepen a growing divide among crypto leaders as lawmakers finalize regulations ahead of the tense midterms.

Dismantling Bill’s mechanics

In a March 3 YouTube broadcast, Hoskinson went beyond political rhetoric to offer a detailed and technical critique of HR 3633, the Digital Asset Market Transparency Act of 2025.

He argued that the bill, as drafted, would create a regulatory Catch-22 that would be a “wet dream” for a rival SEC. The core of his argument is based on a “security by default” framework for newly created digital assets.

He argued that under this structure, every new project, from XRP and Ethereum at their launch to any future protocol, would be classified as “having an investment contract” and fall under the jurisdiction of the SEC.

The path to graduating to a “digital commodity” regulated by the CFTC, the developer warned, is a bureaucratic minefield. He described several “attack vectors” in which the SEC could use rulemaking authority to indefinitely trap projects in security posture, including unprovable decentralization standards and subjective “transfer of value” tests.

“It’s not a good project,” Hoskinson said. “Through regulation, it can become scary and weaponized, and it doesn’t capture the essence of what’s happening in the industry right now.”

He emphasized that while established projects like Cardano and XRP could be “grandfathered,” the legislation would force all US crypto-innovations to be launched overseas, effectively killing the domestic industry.

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Industry and Washington at a standstill

While the CLARITY Act of 2025 passed the House, it stalled in the Senate. The White House had set a March 1 deadline for stakeholders to iron out their differences, but that date passed without a public deal.

The main problem, as Hoskinson pointed out, is not the structural issues he has raised, but a fierce lobbying battle for stablecoin premiums, which the banking industry has warned could trigger a massive exodus of deposits.

The divergence has torn the crypto industry apart, and Ripple CEO Brad Garlinghouse, who predicted a 90% chance of becoming law in April, continued to defend it, stating that “clarity trumps chaos” and that the industry will not allow “perfection to be the enemy of progress.”

Ripple’s CTO David Schwartz also weighed in on the X debate, acknowledging the narrow step and stating that while his company tries not to advocate at the expense of others, “an optimal bill design is better than no bill at all.”

However, Cardano’s founder countered that notion, claiming the bad bill would legislate everything that former SEC chairman Gary Gensler is “trying to do to the industry.”