Senator Cynthia Lummis says the CLARITY Act would close a legal gap that left crypto users exposed in past exchange and platform failures, by making clear that customer cash and digital assets remain customer property if a covered intermediary collapses.

Customer assets and insolvency

According to Lummis, the bill would require covered digital asset intermediaries to treat customer funds and crypto holdings as property belonging to customers rather than the firm itself. The measure would also require those assets to be kept separate from company property.

The proposal goes further by generally barring brokers, dealers and exchanges from using customer assets for their own benefit, or for the benefit of others, unless they have authorization. Lummis said putting those protections into federal law would help avoid ownership disputes if a regulated crypto platform becomes insolvent.

Gap exposed by Celsius and Voyager

The issue gained urgency after the bankruptcies of Celsius and Voyager, which highlighted uncertainty over whether customer deposits remained the property of users or became part of a company’s bankruptcy estate.

In Celsius’s case, a 2023 bankruptcy ruling found that cryptocurrency placed in Celsius Earn accounts was property of the company under the platform’s terms of use. That left affected users as unsecured creditors rather than owners entitled to automatic return of their assets. Voyager’s collapse produced a similar problem, with customer recoveries depending on restructuring instead of the direct return of deposited crypto.

Broader market structure push

Lummis has framed the bankruptcy protections as one part of a wider attempt to set comprehensive rules for U.S. digital asset markets. She said the CLARITY Act is meant to provide regulatory certainty for developers, stronger investor protections and greater market integrity.

The legislation would also define the respective roles of the Securities and Exchange Commission and the Commodity Futures Trading Commission. The aim, according to Lummis, is to create a federal framework that supports crypto innovation and investment in the United States.

Status of the bill

The House has already approved the CLARITY Act, but the measure has not yet passed the Senate. That leaves the proposed customer-property protections and broader market-structure changes still awaiting full congressional approval.

The bill’s supporters present it as a response to lessons from earlier crypto insolvencies, especially where courts and restructuring processes determined how much control customers retained over deposited assets. Whether it becomes law now depends on the Senate’s next steps.

Source: news.bitcoin.com