Cardano and Midnight founder Charles Hoskinson said proposed US crypto legislation could take more than a decade to implement, fail to survive political changes and structurally favor new players while benefiting established cryptocurrencies.
The Digital Asset Market CLARITY Act is still being negotiated in Congress, with lawmakers circulating updated text and trying to close the final loopholes. While a compromise on the stablecoin dividend appears close, other issues, including decentralized finance and Democratic political demands, remain unresolved, leaving the bill lacking a full Senate vote for now.
“Even if it passes, it will take many years of rulemaking,” he told CoinDesk, warning that the process could stretch to “15 years of rulemaking and slow rolling.” He also warned that politicians could weaponize the law depending on who is in power, Democrats or Republicans.
“It’s also unlikely to survive this administration,” Hoskinson said. “If Democrats win in 2029, there are avenues in the existing text that they can use to weaponize the CLARITY Act,”
The collapse of FTX made the Democrats hostile
Hoskinson said the current regulatory environment is a direct result of the collapse of Sam Bankman-Fried’s crypto exchange FTX, which he believes has turned how Democrats viewed crypto from good to bad.
“Back then, we had relatively good bipartisan support,” he said, referring to previous legislative efforts.
“The challenge was that FTX blew up, and then the Democrats went from crypto-curious to crypto-hostile, and then they started a three-year campaign and really hurt the industry.”
The fallout created political risk for the legislators.
“It said, wait, if we take pictures with these guys, we could be taking pictures with people in jail next year. That’s bad for us,” Hoskinson said, adding that FTX’s prominence compounded the damage.
“FTX sponsored Tom Brady. It was a very mainstream project,” Hoskinson said. “It really hurt the public perception of crypto.”
A regulatory trap for newcomers
Hoskinson said one of his biggest concerns with the current regulatory approach is that it treats new crypto projects as securities by default. “I’m not happy with every new project starting as a security by default.”
Under the current structure, projects may struggle to ever leave that classification, Hoskinson said. “There are all kinds of parliamentary procedures that they can use to basically slow down any approval,” he said. “The SEC has no incentive to ever upgrade anything from being a security to a non-security.”
He said the result is a system that favors existing cryptocurrencies while making it harder for new ones to emerge. “Cardano will do well, XRP will do well, Ethereum will do well,” he said. “But future projects can’t compete. They can never grow in ownership and liquidity. It’s efficient to do an IPO, and it’s absurd for that.”
The debate focused on the wrong problem
Hoskinson also criticized the current industry debate surrounding the legislation, saying it is centered on less important issues. “The only problem that people seem to have is whether stablecoins pay returns or not,” he said. “It’s like setting the house on fire and then complaining about the length of the grass. It’s so irrelevant to the root of where we got here.”
More broadly, Hoskinson described the legislation as overly complex and poorly constructed.
“If you try to do everything in one piece of legislation, you’re going to end up with a kind of Frankenstein’s monster,” he said. And more importantly, policy makers lack the technical expertise to regulate crypto effectively. “Regulation has no technical people in the room.”
Driven by politics, not politics
Hoskinson said the political dynamic has made bipartisan cooperation increasingly difficult.
“The crypto industry strongly embraced Trump. It was less philosophical and more existential,” he said, pointing to enforcement actions under former Securities and Exchange Commission (SEC) Chairman Gary Gensler.
At the same time, he said crypto has become politically polarized. “Trump destroyed any notion of bipartisanship. It turned crypto into a partisan conversation.”
He pointed to messages from Democrats that framed crypto negatively. “They talk about topics. Crypto equals corruption equals Trump.” The existing dynamic makes it difficult for lawmakers to publicly support legislation while campaigning against the industry, he said.
Domestic approach to a global industry
Hoskinson said lawmakers have failed to consider that crypto is decentralized and therefore globalized. But there is no attempt to globalize the regulatory framework, he said.
He believes that political decision-makers should adapt to the framework in Europe, the Middle East and Asia. “You have to look at MiCA, Abu Dhabi, Japan, Singapore and say, okay, what are they doing?”
The Cardano founder said that without that coordination, US regulations could become incompatible with global markets. “You end up with an American standard, but it won’t be compatible with the European standard.”
‘We almost had a window’
Hoskinson said he views the current situation as a missed opportunity to build workable, bipartisan legislation. “We almost had a window.” However, he now believes that 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.
