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Crypto users lack bankruptcy protection as Lummis pushes CLARITY
Lummis CLARITY Act, reclassifying crypto deposits as customer property, cleared Senate Banking Committee after Celsius ruling left users as unsecured creditors.
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Senator Cynthia Lummis introduced the Digital Asset Market Clarity Act, known as the CLARITY Act, on July 20. The bill aims to reclassify customer digital assets held on crypto platforms as actual customer property. It cleared the Senate Banking Committee with a 15-9 bipartisan vote.
In January 2023, U.S. Bankruptcy Judge Martin Glenn ruled that $4.2 billion 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 and other institutional creditors for whatever remained.
Celsius was not an isolated case. Voyager's collapse followed a nearly identical pattern, with customer deposits treated as corporate assets during bankruptcy proceedings.
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.