Cardano and Midnight founder Charles Hoskinson said proposed US crypto legislation could take more than a decade to implement, fail to survive political change and structurally disadvantage new entrants while benefiting established cryptocurrencies.
The CLARITY Digital Asset Market Act is still being negotiated in Congress, with lawmakers circulating updated text and trying to close remaining loopholes. Although a compromise on the stablecoin yield appears close, other sticking points, including decentralized finance and Democratic policy demands, remain unresolved, leaving the bill before a full Senate vote for now.
“Even if this passes, it will take many years of rulemaking,” he told CoinDesk, warning that the process could stretch to “15 years of rulemaking and a slow rollout.” He also warned that politicians could use the law as a weapon depending on who is in power, Democrats or Republicans.
“He is also unlikely to survive this administration,” Hoskinson said. “If Democrats win in 2029, the existing text will allow them to use the CLARITY Act as a weapon,”
FTX’s collapse made Democrats hostile
Hoskinson said the current regulatory environment is a direct result of the collapse of Sam Bankman-Fried’s FTX crypto exchange, which he said reversed the way Democrats viewed crypto from good to sour.
“At the time, we had relatively good bipartisan support,” he said, referring to previous legislative efforts.
“The challenge was FTX exploded, then the Democrats went from crypto-curious to crypto-hostile, and then they started a three-year campaign and really damaged the industry.”
The consequences created political risk for lawmakers.
“He was saying, wait, if we take pictures with these guys, we might take pictures with people in prison next year. That’s bad for us,” Hoskinson said, adding that FTX’s prominence amplified the damage.
“FTX was sponsoring Tom Brady. It was a very common project,” Hoskinson said. “It really damaged the public perception of crypto.”
A regulatory trap for newcomers
Hoskinson said one of his biggest concerns with the current legislative approach is that it treats new crypto projects as securities by default. “I’m not happy with the fact that all new projects start as security by default.”
Under the current structure, projects might struggle to move out of that classification, Hoskinson said. “There are all kinds of parliamentary procedures they can use to slow down any approval,” he said. “The SEC has no incentive to move anything from safe to unsafe.”
He said the result is a system that favors existing cryptocurrencies while making it harder for new ones to emerge. “Cardano is going to do good, XRP is going to do good, Ethereum is going to do good,” he said. “But future projects can’t compete. They will never be able to grow in terms of ownership and liquidity. It’s effectively like doing an IPO, and it’s absurd for that.”
Debate focused on the wrong problem
Hoskinson also criticized the current industry debate around the legislation, saying it is focused on less important issues. “The only problem people seem to have is whether or not stablecoins make money,” he said. “It’s like setting the house on fire and then complaining about how long the grass is. It doesn’t matter to the root of where we got here.”
More generally, Hoskinson described the legislation as overly complex and poorly constructed.
“If you try to do everything in one piece of legislation, you’ll end up with sort of a Frankenstein’s monster,” he said. And, more importantly, policymakers lack the technical expertise to effectively regulate crypto. “Rulemaking doesn’t have technical staff in the room.”
Motivated by politics, not politics
Hoskinson said political dynamics made bipartisan cooperation increasingly difficult.
“The crypto industry strongly embraced Trump. It was less philosophical and more existential,” he said, pointing to enforcement actions taken by former Securities and Exchange Commission (SEC) Chairman Gary Gensler.
At the same time, he said crypto had become politically polarized. “Trump has destroyed any concept of bipartisanship. He has turned crypto into a partisan conversation.”
He highlighted posts from Democrats describing crypto negatively. “These are talking points. Crypto equals corruption equals Trump.” The existing dynamic makes it difficult for lawmakers to publicly support legislation while campaigning against the industry, he said.
National approach to a global industry
Hoskinson said lawmakers failed to take into account that crypto is decentralized and, therefore, globalized in nature. However, no attempt is being made to globalize the regulatory framework, he said.
He believes that policymakers should align themselves with existing frameworks in Europe, the Middle East and Asia. “You have to look at MiCA, Abu Dhabi, Japan, Singapore and ask: okay, what are they doing?
The Cardano founder said that without this coordination, US rules could become incompatible with global markets. “You will end up having an American standard, but it will not be compatible with the European standard.”
“We almost had a window”
Hoskinson said he views the current situation as a missed opportunity to craft viable bipartisan legislation. “We almost had a window.” However, he now believes the crypto industry will face uncertainty in the near future, explaining that everyone seems to find something they don’t like.
“And now I don’t believe it will pass, and even if it does…” he concluded.
