Hoskinson Calls Clarity Act 'Insanity,' Says It Would Classify XRP as Security

Charles Hoskinson, founder of Cardano, stated in an interview that the Clarity Act in its current form would classify XRP, Ethereum, and ADA as securities if those projects were founded today, contradicting celebrations from the XRP community over the bill’s passage.

The Security Trap Mechanism

Hoskinson argued that the mature blockchain standard written into the current version of the Clarity Act creates an impossible situation for new cryptocurrency projects. Under the framework, a new project must demonstrate community growth, liquidity, and broad ownership distribution to escape security classification. However, achieving these metrics requires exchange listings and investment—resources unavailable to projects classified as securities from inception.

“XRP won its court case under the ambiguous laws,” Hoskinson said. “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-style SEC would have the law on their side.”

Hoskinson contended that the ambiguous regulatory environment that industry participants had criticized was, in practice, what enabled major projects to grow before regulators could apply restrictive classifications.

Protection for Established Projects Only

Hoskinson stated that established projects would benefit from the Clarity Act’s mature blockchain standard because they already satisfy its requirements. “Cardano will get a pass. XRP will get a pass. Ethereum will get a pass,” he said. “We’re already commodities under the mature blockchain standard. So it’s good for me. It’s horrible for the industry.”

He characterized the bill as “a bill for the incumbents,” arguing it protects large, decentralized, established projects while creating barriers for new entrants.

Political Risk and Future Weaponization

Hoskinson identified a longer-term risk: future administrations could apply the Clarity Act’s framework with maximum hostility toward new projects. “When the Democrats weaponise it, they can structure it in a way that every new project will always be a security,” he warned. He questioned the logic of treating security classification as harmless if industry figures like Brian Armstrong are fighting against stablecoin regulation.

FAQ

Q: What is the mature blockchain standard in the Clarity Act?

A: According to Hoskinson, the mature blockchain standard is a framework in the Clarity Act that classifies projects as commodities if they meet certain criteria: sufficient community growth, liquidity, and broad ownership distribution. Established projects like Cardano, XRP, and Ethereum would likely meet these requirements and receive commodity status.

Q: Why would the Clarity Act classify new projects as securities?

A: Hoskinson argued that new projects face a “security trap.” To escape security classification, they must achieve community growth, liquidity, and broad ownership—but these require exchange listings and investment. New projects classified as securities cannot obtain these resources, making it impossible to meet the mature blockchain standard requirements.

Q: How could the Clarity Act be weaponized in the future?

A: Hoskinson warned that a future administration could apply the Clarity Act’s framework to classify all new cryptocurrency projects as securities by default, effectively blocking new project launches in the United States.