Charles Hoskinson:”The Clarity Act Will Kill American Crypto”
Charles Hoskinson:
“The Clarity Act Will
Kill American Crypto”
The Cardano and Midnight Network founder says the landmark crypto legislation — if passed in its current form — doesn’t level the playing field. It pulls the ladder up. A wide-ranging conversation on the 1933 Securities Act, why AI agents live in blockchain land, and what real crypto regulation actually looks like.
“Cardano will get a pass. XRP will get a pass. Ethereum will get a pass. We’re already commodities. So it’s good for me. It’s horrible for the industry.”— Charles Hoskinson, Co-Founder of Ethereum & Cardano
When Charles Hoskinson sat down with Crypto Coin Show’s Ashton Addison earlier this month, the expectation was a conversation about Midnight Network — the privacy infrastructure project he’s been quietly building for years. What emerged was something far more candid: a dissection of why the Clarity Act, the legislation many in the crypto industry are pinning their hopes on, may be the worst outcome crypto could ask for.
Hoskinson has lived through every cycle. He helped build Ethereum before walking away to found Cardano from scratch. He’s testified before regulators, drafted legislation in Wyoming, and watched a decade of Washington promises dissolve into nothing. When he speaks about the Clarity Act, he isn’t doing it as an outsider lobbyist. He’s doing it as someone who would personally benefit from its passage — and who’s still against it.
A Law Built for the Incumbents
The central problem, in Hoskinson’s view, isn’t just that the Clarity Act is flawed. It’s that it was built for the wrong people from the beginning.
“The reason Cardano and Bitcoin and Ethereum got to where they’re at is that ambiguity gave us the freedom to be ourselves.”
Under the bill’s current language, new crypto projects would be classified as securities by default. The path to escaping that designation — what the bill calls the “mature blockchain” standard — requires the kind of community growth, exchange listings, and venture capital backing that is structurally impossible to achieve if you’re already being treated as an unregistered security from day one.
“Under this law, if Ripple was founded today, XRP would be a security. Ethereum would be a security. ADA would be a security. And a Gary Gensler-esque SEC would have the law on their side. They didn’t before. They had ambiguity. So they were losing court cases.”
The irony is sharp: the projects that fought the SEC for years under ambiguous law — and largely won — are now the incumbents who benefit from a “mature blockchain” carve-out. Anyone building behind them inherits a legal framework designed to prevent them from ever reaching the same scale.
No VC investment if you’re a security by default. No exchange listings. No community building. No path to decentralization. You can never grow into a mature blockchain because the definition of maturity requires resources you can’t access when you’re pre-classified as a security.
“It’s a bill for the incumbents,” Hoskinson said plainly. “We were allowed to succeed, but then we pulled the ladder up.”
The 93-Year-Old Problem Nobody Wants to Fix
Hoskinson’s critique goes deeper than the current bill. The root of the problem, he argues, is that Congress is trying to regulate 2026 technology using a legal framework built for the Great Depression.
The definition of a “security” hasn’t been meaningfully updated since FDR was president, JFK’s father was the first SEC chairman, and the United States was clawing its way out of the roaring twenties. The definition cannot be changed because of how deeply embedded it is across regulatory and legal infrastructure — and so every attempt to regulate crypto gets distorted by it.
“The very first thing you need to do is start with the definition of a security and update and modernize it — add an extra category, a concept of a blockchain-based or digital security. Then once you have that, you can use the blockchain as a disclosure mechanism, and that’s a hook you can use for rulemaking to allow ZK disclosure and all these other things.”
The solution, in Hoskinson’s framework, is not a massive omnibus bill trying to do everything at once. It’s a targeted update to securities law that creates a new category for decentralized digital assets — one that allows compliance without requiring a centralized entity that must never dissolve.
Why the Process Was Broken From the Start
Beyond the substance of the bill, Hoskinson is scathing about how it was put together. The process failed on four fronts simultaneously: it was partisan, it was pay-to-play, it excluded technical experts entirely, and it ignored the global dimension of crypto.
- Process failure #1 — Partisanship Democrats were excluded from the drafting process. With no stake in the outcome, they have every incentive to kill the legislation when they return to power — which, Hoskinson argues, they will.
- Process failure #2 — Patronage Participation cost between one and five million dollars in donations. The people in the room were addressing their own business interests, not designing industry-wide infrastructure.
- Process failure #3 — No engineers, no scientists NIST — the National Institute of Standards and Technology — was never invited. Lawyers were left to define blockchain, cryptocurrency, and digital assets without any grounding in how these systems actually work.
- Process failure #4 — No global coordination Not once did US negotiators engage with MiCA architects in Europe, the JFSA in Japan, or Singapore’s MAS. Countries waiting for US leadership to harmonize their own frameworks were left without it.
The Sarbanes-Oxley Act, passed in the wake of Enron in 2003, offers a counterexample. When the US passed it, Australia and dozens of other countries passed equivalent legislation almost immediately — because they wanted to be interoperable with the world’s largest financial market. The US had the same leverage available with crypto. It chose not to use it.
The Hidden Trap in the Bill’s Language
Even for those who accept the tradeoffs and just want to get something passed, Hoskinson has a warning that has largely gone unheeded. He has identified four distinct attack vectors buried in the current language of the Clarity Act that a future, hostile SEC could use to keep projects classified as securities indefinitely.
“I made a video where I showed four different attack vectors using the existing language of the bill that the Securities Exchange Commission could use to keep things as a forever security under the current language of the Clarity Act they’re trying to pass. Does anybody care? No. Because they’re incompetent.”
The core vulnerability: if the Democrats regain control of the SEC’s rulemaking apparatus — which Hoskinson views as likely after the 2026 midterms — a hostile commission wouldn’t need to pass new legislation. They could simply use the levers already embedded in the bill to structurally prevent any new project from ever graduating out of security status.
What Good Legislation Actually Looks Like
Hoskinson isn’t simply against the Clarity Act. He has a blueprint — one he helped design in Wyoming, where he successfully pushed through over thirty cryptocurrency laws with bipartisan support, including the Stem Cell Freedom Act. His process was methodical: months of preparation, simultaneous engagement with regulators, industry, and technical experts, and a modular bill structure designed to pass section by section.
“To get Clarity done right, we’ve got to globalize it. We’ve got to get inter-agency alignment. It’s got to represent the non-financial use cases. We’ve got to update our securities law. The carrot for that is ten trillion dollars of real world assets entering our space.”
The SEC Has Already Done Something Right
In an interview full of sharp criticism, Hoskinson offered one note of genuine credit. SEC Chair Paul Atkins has released a framework clarifying what is and isn’t a security, and that framework may be more durable than any legislative outcome Congress is likely to produce this year.
“Once that gets rolling, it’s really hard for a future SEC to turn that back,” Hoskinson said. The implication: passing a deeply flawed Clarity Act may actually make things worse than staying in the current regulatory gray zone, where the SEC’s new posture under Atkins provides practical clarity without locking in language a hostile future administration could weaponize.
The Bigger Picture
The Clarity Act debate is a proxy for a deeper question: whether the crypto industry wants to replicate the financial system it was built to replace, or build something genuinely different. Hoskinson’s argument is that incumbents — the projects that survived the ambiguous years and emerged as commodities — now have a structural incentive to close the door behind them.
For anyone building a new project in America today, the stakes are clear. If the bill passes as written, you begin as a security, with no path to the resources required to escape that status. If it fails, you wait until 2029, build under the Atkins framework, and fight again from a better position.
“I’d rather fight a court case with ambiguity than fight a court case where the law is not on my side,” Hoskinson said. Coming from the man who co-founded Ethereum and built Cardano through a decade of regulatory hostility, that’s not despair. It’s strategy.
