Senator Lummis Says CLARITY Act Would Have Protected Users in Crypto Bankruptcies

US Senator Cynthia Lummis said the CLARITY Act will protect crypto users from losing their deposits when crypto firms go bankrupt. The pro-crypto Republican senator from Wyoming said this in an X post today.

According to Lummis, crypto users saw their assets become part of the bankruptcy pool after Voyager and Celsius failed. However, she stated that the proposed crypto regulation will change that and ensure they retain ownership.

The crypto industry has seen several high-profile bankruptcies in recent years, including those of FTX, Celsius, Voyager, and others. This has led to significant losses for many retail investors, as customer deposits are not treated separately from the company’s assets.

CLARITY Act to Change How Crypto Firms Treat User Deposits

However, the CLARITY Act looks set to change that as Section 701 of the proposed crypto regulation amends the  US Bankruptcy Code. The section titled “Protecting Customer Property” now includes digital commodities and ancillary assets as part of the definition of customer property under US bankruptcy law.

It further requires that such assets be treated as customers’ property, just as securities and commodities are in broker-dealer bankruptcies. The provision also prevents crypto platforms from commingling customers’ assets with the platform’s assets.

If passed, it could have a significant impact on how crypto firms treat users deposits in event of a bankruptcy. Under the proposed law, ‘user deposits will now be treated separately, and users can recover their assets in kind in the event of bankruptcy.

This will prevent situations in which customers are treated like unsecured creditors and forced to go through lengthy bankruptcy proceedings to recover the value of their assets.

Crypto Regulation Continues to Stall in Senate

Meanwhile, Lummis’ post comes amid continued delays in the proposed legislation. The CLARITY Act is still awaiting the final Senate vote, which requires bipartisan support.

According to reports, the delays are due to differences over the ethics provisions that Democrats supporting the bill have been seeking, even as the White House opposes them.

Interestingly, the White House has also gotten involved in the push to pass the crypto regulations. President Trump even called on the Senate to pass the law in honor of recently deceased Senator Lindsey Graham.

Trump posted on Truth Social Post that “China, and many other countries, would like to take complete and total control of this major financial ‘happening,’ as well as A.I., where we are now leading, but where they are fighting hard. Don’t let China win on either subject!!!”

The president also reportedly met with Republican Senators Lummis and Bernie Moreno, along with key members of his White House team. However, there is no clarity on when the bill will finally come to the floor for a vote.

With  14 working days remaining before the August recess, there are concerns that the CLARITY Act may not pass this year. Crypto Journalist Eleanor Terret noted that if the bill does not get to the Senate floor by this week, any chance of passage before August is closed.