Charles Hoskinson says the CLARITY Act will create a “security by default” trap for new cryptocurrency projects.
Cardano founder Charles Hoskinson has launched a blistering attack on the CLARITY Act, the flagship U.S. crypto market structure bill, labeling it a “horrific trash bill” that would classify nearly all digital assets as securities by default and hand a “weaponized” Securities and Exchange Commission (SEC) the power to stifle the industry for years.
His comments deepen a growing split among crypto leaders as lawmakers push to finalize the rules before the midterm cycle intensifies.
Dismantling the Bill’s Mechanics
In a March 3 YouTube broadcast, Hoskinson moved beyond political rhetoric to present a detailed, technical critique of H.R. 3633, the Digital Asset Market Clarity Act of 2025.
He argued that the bill, as drafted, creates a regulatory Catch-22 that would be “a wet dream” for an adversarial SEC. The core of his argument rests on the bill’s “security by default” framework for newly created digital assets.
He asserted that under this structure, every new project, from XRP and Ethereum at their launches to any future protocol, would be classified as an “investment contract asset” and fall under SEC jurisdiction.
The path to graduating to a “digital commodity” regulated by the CFTC, the developer warned, is a bureaucratic minefield. He outlined several “attack vectors” where the SEC could exploit rulemaking authority to indefinitely trap projects in security status, including impossible-to-prove standards for decentralization and subjective “value attribution” tests.
“This is not a good bill,” Hoskinson said. “Through rulemaking, it can become horrific and weaponized and it doesn’t cover the core of what’s going on in the industry right now.”
He stressed that while established projects like Cardano and XRP might be “grandfathered in,” the legislation would force all future American crypto innovation to launch overseas, effectively killing the domestic industry.
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An Industry and Washington at an Impasse
While the CLARITY Act passed the House in 2025, it has stalled in the Senate. The White House had issued a March 1 deadline for stakeholders to bridge their differences, but the date passed with no public compromise reported.
The primary holdup, as Hoskinson noted, is not the structural issues he raised, but a fierce lobbying battle over stablecoin rewards, which the banking industry warned could trigger a massive exodus of deposits.
The divide has splintered the crypto industry, with Ripple CEO Brad Garlinghouse, who has predicted a 90% chance of the bill becoming law by April, continuing to champion it, arguing that “clarity beats chaos” and that the industry cannot let “perfection be the enemy of progress.”
Ripple CTO David Schwartz also weighed in on the debate on X, acknowledging the tightrope walk, stating that while his company tries not to advocate to the detriment of others, “a sub-optimal bill is better than no bill at all.”
However, the Cardano founder countered that view, claiming that a bad bill would enshrine into law every single thing former SEC Chair Gary Gensler was “trying to do to the industry.”
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