Senator Lummis says with CLARITY “your crypto stays yours” – but bankruptcy shields have limits
The CLARITY Act’s Section 701 aims to keep qualifying crypto in customer-property pools during certain Chapter 7 bankruptcies, so assets “held for customers” could remain theirs rather than enter the estate. But the protection is conditional: it depends on the asset type, the account terms, and the insolvency regime. It applies most naturally to custody arrangements, not to yield or lending products where the platform receives title and customers may only hold an IOU. Celsius shows the key distinction. A bankruptcy court found Earn users had transferred “all right and title” to Celsius, so their balances belonged to the estate and users were unsecured creditors. Section 701 would not automatically change that outcome unless the product and legal structure fit its boundaries. The bill also keeps other regimes separate: securities, bank deposits, commodity contracts, and stablecoins are not all covered the same way. Self-custody is addressed elsewhere in the package.
