Cynthia Lummis warns crypto users lack bankruptcy protections, pushes CLARITY Act forward

Senator Cynthia Lummis introduced the Digital Asset Market Clarity Act, known as the CLARITY Act, on July 20, aiming to reclassify customer digital assets held on crypto platforms as actual customer property. The bill recently cleared the Senate Banking Committee with a 15-9 bipartisan vote. The Celsius problem, codified In January 2023, US Bankruptcy Judge Martin Glenn ruled that $4.2B in Celsius Earn accounts had effectively become company property. Customers who thought they were depositing assets for safekeeping were legally reclassified as unsecured creditors, getting in line behind banks, lawyers, and other institutional creditors for whatever scraps remained. Celsius wasn’t an isolated case. Voyager’s collapse followed a nearly identical pattern, with customer deposits treated as corporate assets during bankruptcy proceedings. What the CLARITY Act actually does The bill, designated H.R. 3633, tackles several problems simultaneously. The headline provision would mandate that crypto platforms segregate customer assets from their own corporate holdings. Platforms would also be prohibited from using customer deposits without explicit authorization. Beyond asset protection, the l...