The Part of FTX That Survived Shows Why Congress Needs the CLARITY Act

When FTX collapsed, the entities bound by federal law survived. As mainstream finance converges with digital assets, the legal framework designed to protect the broader system is the very bill the Senate declined to pass this week, writes Randi Abernethy, Head of Clearing and Group Risk at Bullish Exchange.

While the Senate spent weeks not passing the CLARITY Act, the largest institutions in American finance continued moving onchain. JPMorgan tokenized ETF holdings through the Depository Trust & Clearing Corporation (DTCC) production pilot. More than 50 firms — including BlackRock and Goldman Sachs — have signed on to tokenize stocks and Treasuries through the same infrastructure. BlackRock's CEO has described tokenization as a way to "update the plumbing of the financial system." The matter before Congress has stopped being about crypto.

Lessons from 2008

If you run a traditional trading desk and regard CLARITY as a problem for the digital asset industry rather than your own, consider 2008. A new financial instrument grew rapidly inside the regulated system under rules that had never been stress-tested. When it broke, the losses did not stay where they originated. The crisis reached firms that never touched a subprime mortgage and erased approximately $17 trillion in household wealth.

Randi Abernethy is the Head of Clearing and Group Risk at Bullish Exchange. She testified on the CLARITY Act before a House Financial Services subcommittee in July 2026. Her full congressional testimony is available here.

The parallel is not that tokenized assets are the next subprime. The point is that a shock travels through shared plumbing regardless of whether your desk touched what broke. The wiring is no different today: stablecoins alone hold well over $100 billion in Treasury bills. If a large stablecoin fails and is forced to sell, the shock lands in the funding markets that traditional desks rely on every morning. Federal Reserve staff have flagged this risk; it nearly materialized in 2023, when Circle's USDC briefly lost its peg because its reserves were held at a failing bank. The IMF has warned that such a shock would travel faster than in 2008, because these markets are volatile and, without clearing requirements, there is no clearinghouse to contain a default before it spreads.

Broad Support, Unanswered Questions

The bill has backers well beyond crypto. Fidelity, Goldman Sachs, and Franklin Templeton have all urged Congress to pass it, arguing that clear rules would protect investors. Critics counter that the proposed rules are too soft — an argument that deserves a hearing.

A bill like CLARITY writes the binding framework required for nationwide investor protection into federal law. It would ensure firms are supervised by federal agencies and would establish key protections such as customer asset segregation, conflict-of-interest management, capital adequacy, and transparency. The details would be left to rulemaking, much as Dodd-Frank — the 2010 reform law enacted in response to the 2008 crisis — set the architecture and agencies spent years filling it in.

Whether to make any of this law at all is the question the Senate left unanswered this week. From here, the calendar only hardens: a thin legislative window in September, followed by an election year.

As it stands, investor protections at the federal level remain fragmented and fragile — not law, but an interpretive notice sorting 16 tokens, a collateral pilot, a few no-action letters, and a memorandum of understanding between two federal agencies. Any of these measures can be revoked without a vote. The rest is left to the states, where investors receive robust protection in certain jurisdictions, less elsewhere, and in some states none at all. None of this patchwork reaches a market that is inherently national.

What FTX Revealed About Legal Protections

The last great collapse already demonstrated which protections hold and which give way. When FTX failed, its offshore exchange had misused customer assets for years. But several entities under the FTX umbrella — including LedgerX, a CFTC-regulated exchange and clearinghouse — emerged from the collapse intact, with customer assets segregated and untouched.

LedgerX survived for one reason: its protections were law. Not a clever mechanism, but a plain one — customer segregation that a regulator required and verified. Those rules held regardless of whether anyone chose to honor them once panic set in. The unregulated parts of FTX ran on promises. In one collapse, under one roof, law held and promises broke.

Regulatory Clarity and the Return of Firms Onshore

FTX operated offshore for a reason. For years, the United States addressed this industry with enforcement rather than rules, and capital and talent flowed to jurisdictions where regulations were clear: Europe, Asia, and the Gulf. The rest went where there was no real oversight — precisely the gap in which an exchange like FTX could grow.

When Washington began offering clarity, firms started returning to the U.S. Nexo came back after years away. London's Wintermute opened a New York office. Switzerland's Taurus established operations in New York to serve its banking clients. Law protects what it can reach, and the CLARITY Act would make that migration permanent rather than leaving the next firm to operate in the shadows.

The bill would make the regulated, onshore model the norm for firms such as Bullish, a NYSE-listed digital asset market infrastructure company (and the parent company of CoinDesk) already regulated in financial centers including Frankfurt, Hong Kong, and New York. Bullish is currently pursuing CFTC registration as a designated contract market and derivatives clearing organization.

The difference between a failure the system absorbs and one it does not is the line LedgerX already drew: federal law holds; promises do not. The CLARITY Act would write that line into law before the next crisis writes it in losses.

Every system at scale meets its test of rigor. Only those built on law survive it.

Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.

Source: CoinDesk