Senator Lummis says CLARITY would keep customer crypto out of bankrupt estates
Section 701 would apply Chapter 7 customer-property treatment to qualifying customer-held digital assets at failed exchanges or custodians, though classification and title-transfer provisions would still affect how protections apply.
Senator Lummis said the CLARITY bill means “your crypto stays yours,” citing Section 701, which would place qualifying digital assets held for customers under Chapter 7 customer-property rules in bankruptcy. The proposal is intended to keep customer holdings at a failed exchange or custodian from being treated as part of the company’s bankruptcy estate, giving protections closer to traditional finance. However, the protection is not absolute, because asset classification and title-transfer clauses would still matter in determining how holdings are treated. Fox Business crypto reporter Eleanor Terrett said the bill could help prevent a repeat of situations similar to FTX.
- Chapter 7: U.S. liquidation bankruptcy process
- customer-property rules: Rules governing assets held for customers in bankruptcy
- title-transfer clauses: Contract terms that can shift legal ownership of assets