Cardano and Midnight founder Charles Hoskinson said proposed crypto legislation in the US could take more than a decade to implement, would not survive political change, and would structurally harm new entrants while benefiting established cryptocurrencies.
The Digital Asset Market CLARITY Act is still being negotiated in Congress, with lawmakers circulating updated text and attempting to close final gaps. While a compromise on stablecoin performance appears close, other sticking points, including decentralized finance and Democratic policy demands, remain unresolved, leaving the bill without a full vote in the Senate for now.
“Even if it passes, it will take many years of regulation,” he told CoinDesk, warning that the process could extend to “15 years of regulation and slow progress.” 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 they can use to weaponize the CLARITY Act.”
FTX collapse made Democrats hostile
Hoskinson said the current regulatory environment is a direct result of the collapse of Sam Bankman-Fried’s FTX cryptocurrency exchange, which he strongly believes changed the way Democrats viewed cryptocurrencies 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 being crypto-curious to crypto-hostile, and then they started a three-year campaign and really hurt the industry.”
The fallout created a political risk for lawmakers.
“It said, 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 widespread project,” Hoskinson said. “It really hurt the public perception of cryptocurrencies.”
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 defaults. “I’m not happy with all new projects starting as a default.”
Under the current structure, projects could have difficulty breaking out of that classification, Hoskinson said. “There are all kinds of parliamentary procedures they can use to basically slow down any approval,” he said. “The SEC has no incentive to graduate something from value to non-value.”
He said the result is a system that favors existing cryptocurrencies while making it difficult for new ones to emerge. “Cardano will do very well, XRP will do very well, Ethereum will do very well,” he said. “But future projects cannot compete. They will never be able to grow in ownership and liquidity. In practice, it is doing an IPO, and it is absurd for that reason.”
The debate focused on the wrong problem
Hoskinson also criticized the current industry debate around the legislation, saying it focuses on less important issues. “The only problem people seem to have is whether stablecoins pay yield 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 generally, Hoskinson described the legislation as overly complex and poorly crafted.
“If you try to do everything in one law, you’re going to end up being kind of a Frankenstein’s monster,” he said. And, more importantly, policymakers lack the technical expertise to regulate cryptocurrencies effectively. “Rules-making doesn’t have technical people in the room.”
Driven by politics, not policies
Hoskinson said political dynamics have made bipartisan cooperation increasingly difficult.
“The cryptocurrency industry firmly embraced Trump. He was less philosophical and more existential,” he said, pointing to coercive actions under former Securities and Exchange Commission (SEC) Chairman Gary Gensler.
At the same time, he said that cryptocurrencies have become politically polarized. “Trump destroyed any concept of bipartisanship. He turned cryptocurrencies into a partisan conversation.”
He pointed to messages from Democrats that frame cryptocurrencies in a negative light. “They are talking points. Crypto equals corruption equals Trump.” The existing dynamics make it difficult for lawmakers to publicly support legislation while campaigning against the industry, he said.
Domestic approach towards a global industry.
Hoskinson said lawmakers have not considered that cryptocurrencies are decentralized and therefore globalized in nature. However, there is no attempt to globalize the regulatory framework, he stated.
He believes authorities should align with European, Middle Eastern and Asian frameworks. “You have to look at MiCA, Abu Dhabi, Japan, Singapore and say, well, what are they doing?”
The Cardano founder said that without such coordination, US rules could become incompatible with global markets. “You’ll end up having an American standard, but it won’t be compatible with the European standard.”
‘We almost had a window’
Hoskinson said he sees the current situation as a missed opportunity to craft workable bipartisan legislation. “We almost had a window.” However, he now believes that the crypto industry will face uncertainty in the near future and explains that everyone seems to be finding something they don’t like.
“And now I don’t think it will happen, and even if it does…”, he concluded.
