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 legislation attempts to untangle the jurisdictional mess between the SEC and CFTC, and would establish clearer lanes for each regulator and streamline registration pathways for exchanges.

Anti-money laundering provisions are also baked into the legislation. An updated draft released around July 22 includes expanded discussions on ethics provisions and illicit-finance safeguards.

Why this matters beyond bankruptcy law

The 2022 wave of platform failures, including Celsius, Voyager, and FTX, did enormous damage to public trust in the crypto industry. The CLARITY Act represents one of the first serious attempts to convert that outrage into structural reform.

The bill’s path forward remains uncertain despite its committee success. Senate floor scheduling, potential amendments, and reconciliation with any House counterpart could all introduce delays or substantive changes. For crypto holders currently sitting on exchange balances, until this or similar legislation passes, their deposits on a centralized platform are legally closer to an unsecured loan than a protected account.