Lummis Seeks Custody Protections Ahead of Crucial Crypto Bill Vote

Senator Cynthia Lummis is pushing for stronger crypto custody protections as the Senate prepares to vote on the CLARITY Act on September 15. The bill aims to create explicit federal rules for digital commodity intermediaries and would require qualified custodians to segregate customer assets.

Lummis argues that these protections are necessary to prevent another exchange collapse from wiping out users' assets. She notes that exchanges have failed in the past, leaving customers with no access to their funds.

The CLARITY Act includes provisions for bankruptcy protections and restrictions on how registered intermediaries can use customers' property. This means that customer money and crypto held by a digital commodity exchange would be treated as customer property in bankruptcy proceedings.

Lummis believes that stronger segregation and bankruptcy protections could have shielded customers from losses during the 2022 collapse cycle, citing FTX's bankruptcy as an example.