Key Highlights
- Senator Cynthia Lummis renewed calls for Congress to pass the CLARITY Act, citing the Celsius and Voyager bankruptcies.
- She argued that customer crypto should never become part of a bankrupt company’s estate.
- The legislation remains under Senate negotiation as lawmakers work to finalize the updated draft.
U.S. Senator Cynthia Lummis is once again using the collapses of Celsius Network and Voyager Digital to argue that Congress needs to pass the Digital Asset Market CLARITY Act, saying the legislation would close one of the biggest legal loopholes exposed during the 2022 crypto crisis.
In a post on X, Lummis said customers of the failed crypto platforms did not simply lose access to their accounts; they also lost legal ownership of their digital assets once bankruptcy proceedings began. She argued that the CLARITY Act would prevent similar situations by legally separating customer assets from company property.
Why Lummis says the CLARITY Act is needed
Lummis’ comments center on Section 701 (Title VII – Protecting Customer Property) of the CLARITY Act, which proposes major changes to how digital assets are treated under U.S. bankruptcy law.
Section 701 would amend the Bankruptcy Code to ensure that digital commodities and related assets held by crypto platforms are legally recognized as customer property, rather than assets belonging to the company itself.
The proposal would:
- Require crypto custodians and trading platforms to treat customer assets as property held on behalf of users.
- Prevent customer crypto from becoming part of a company’s bankruptcy estate if the platform fails.
- Stop exchanges from using terms of service or commingled custody arrangements to later claim ownership over customer assets.
Lummis believes these provisions would fundamentally change how crypto bankruptcies are handled. “That’s not how customer funds should work. The CLARITY Act requires segregation so your assets never enter that fight in the first place,” she wrote.
Celsius and Voyager cited as cautionary examples
Lummis referenced the bankruptcies of Celsius Network and Voyager Digital in 2022, when the collapse of both crypto lenders raised questions about the legal treatment of customer assets during insolvency.
Celsius, which once managed more than $20 billion in customer assets, filed for bankruptcy after freezing withdrawals, while Voyager also sought protection following losses tied to the collapse of hedge fund Three Arrows Capital.
According to Lummis, in both cases, customer assets were not legally segregated from company assets and became part of the bankruptcy estates, leaving users to recover their holdings through lengthy court-supervised restructuring proceedings.
Consumer protection remains a central pillar of the bill
While much of the public debate around the CLARITY Act has focused on whether the SEC or CFTC should oversee digital assets, Lummis’ comments have emphasized that the legislation is also about consumer protection.
Supporters argue that legally recognizing customer crypto as customer property would reduce uncertainty during exchange failures and strengthen confidence in regulated digital asset markets.
Industry participants have long argued that traditional brokerage rules already provide similar protections for securities and commodities, and that crypto investors deserve comparable treatment.
Latest status of the CLARITY Act
Lummis’ renewed push comes as lawmakers continue negotiating the updated Senate version of the CLARITY Act. The revised draft, originally expected last week, has been delayed while lawmakers work through disagreements over ethics provisions, state enforcement powers, and market structure language.
Negotiators are attempting to reconcile competing versions developed by the Senate Banking Committee and Senate Agriculture Committee before the bill reaches the Senate floor. Many in the crypto industry believe the legislation must advance before Congress begins its August recess if it is to have a realistic chance of becoming law this year.
Bankruptcy reforms: One of CLARITY’s biggest changes
Although the CLARITY Act is primarily viewed as a market structure bill, Lummis argues its bankruptcy reforms could become one of its most important long-term impacts.
For customers affected by the failures of Celsius and Voyager, the proposed segregation requirements would represent a fundamental shift in how digital assets are protected under U.S. law.
If enacted, the legislation would establish, for the first time, that customer-held digital assets cannot simply become part of a failed crypto company’s estate, potentially reshaping how future crypto bankruptcies are handled in the United States.
Also read: Trump Approves CLARITY Act Ethics Deal Democrats Have Yet to See
